U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended June 30, 2013
Commission File Number 001-34024
Sino-Global Shipping America, Ltd.
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction of
incorporation or organization)
11-3588546
(I.R.S. employer
identification number)
136-56 39th Avenue,
Room #305
Flushing, NY 11354
(Address of principal executive offices and zip code)
(718) 888-1814
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class
Common Stock, without par value per share
Name of each exchange on which registered
NASDAQ Capital Market
Securities registered under Section 12(g) of the Exchange Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1) No
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No (cid:1)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (cid:1)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer
(cid:1)
Accelerated filer
Non-accelerated filer
(cid:1) (Do not check if a smaller reporting company)
Smaller reporting company
(cid:1)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:1) No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.45 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes No (cid:1)
The Company is authorized to issue 10,000,000 shares of common stock, without par value per share, and 1,000,000 shares of preferred
stock, without par value per share. As of the date of this report, the Company has issued and outstanding 4,703,841 shares of common stock and
no shares of preferred stock.
The aggregate market value of the shares of common stock, without par value (“Common Stock”), of the registrant held by non-affiliates
on December 31, 2012 was approximately $ 2,623,784 , based on the closing sales price of $1.79 per share, as reported on the NASDAQ Capital
Market, multiplied by the number of outstanding shares held by non-affiliates on that date (1,465,801 shares).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into Parts I, II and III of this Form 10-K: the registration statements
filed with the Commission on January 11 and May 12, 2008, as amended (file nos. 333-150858 and 333-148611) (the “Registration Statements”)
and prospectus filed pursuant to Rule 424(b)(3) of the Securities Act of 1933 (the “Securities Act”) on May 21, 2008 (the “IPO Prospectus”).
SINO-GLOBAL SHIPPING AMERICA, LTD.
FORM 10-K
INDEX
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Selected Financial Data.
Management’s Discussion and Analysis or Plan of Operation.
Quantitative and Qualitative Disclosures about Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.
Directors, Executive Officers and Corporate Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Certain Relationships and Related Transactions, and Director Independence.
Principal Accountant Fees and Services.
Exhibits, Financial Statement Schedules.
i
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
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1
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8
9
9
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to
projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based
upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking
statements typically are identified by the use of terms such as “look,” “may,” “will,” “should,” “might,” “believe,” “plan,” “expect,”
“anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements
may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or
anticipated, including but not limited to the following:
the ability to timely and accurately provide shipping agency services;
its dependence on a limited number of larger customers;
•
•
• political and economic factors in the People’s Republic of China (“PRC”);
•
• unanticipated changes in general market conditions or other factors, which may result in cancellations or reductions in need for the
the Company’s ability to expand and grow its lines of business;
Company’s services;
•
• a weakening of economic conditions which would reduce demand for services provided by the Company and could adversely affect
profitability;
the effect of terrorist acts, or the threat thereof, on consumer confidence and spending, or the production and distribution of product and
raw materials which could, as a result, adversely affect the Company’s shipping agency services, operations and financial performance;
the acceptance in the marketplace of the Company’s new lines of services;
foreign currency exchange rate fluctuations;
•
•
• hurricanes or other natural disasters;
•
•
• other risks outlined above and in the Company’s other filings made periodically by the Company.
the Company’s ability to attract, retain and motivate skilled personnel to serve the Company.
•
the Company’s ability to identify and successfully execute cost control initiatives;
the impact of quotas, tariffs, or safeguards on the importation or exportation of the Company’s customer’s products; or
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The
Company undertakes no obligation to update this forward-looking information. Nonetheless, the Company reserves the right to make such
updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this
Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to
provide any other updates.
ii
Item 1. Business.
General
PART I
We are a general shipping agency service provider headquartered in the United States with subsidiaries in Australia, Canada, Hong
Kong and the mainland China. Our principal geographic market is in the People’s Republic of China (“PRC”). As PRC laws and regulations
restrict foreign ownership of shipping agency service businesses, we provide shipping agency services in the PRC through our affiliate, Sino-
Global Shipping Agency Ltd. (“Sino-China”), a Chinese legal entity, which holds the licenses and permits necessary to operate shipping services
in the PRC. Sino-China is located in Beijing with branches in Qingdao, Qinhuangdao and Fangchenggang and provides general shipping agency
services in all commercial ports in the PRC. Through these offices, we are able to coordinate our clients’ shipping needs, including preparing
documents, husbanding vessels, working through customs issues, coordinating matters with port authorities, overseeing and settling cargo
claims, tracking shipments, recommending trucking, warehousing and complementary services. We provide these services mainly through our
well-established local agent network. We also act as a local agent and attend vessels directly in the ports in which we have branch offices.
We have designed our services to simplify the shipping process for our clients and to keep our clients fully informed about the status of
their shipments. To that end, we analyze the information about prospective shipments provided by our clients to determine the most economical
and efficient transportation solutions and then leverage our position as a shipping agency to negotiate competitive shipping rates. We also give
our clients daily disbursement reports to empower them to monitor and dispute all questionable charges. In addition to allowing clients to
monitor disbursements, our Disbursement Department audits all bills provided by ports for unreasonable charges that violate the guidelines
issued by China’s Ministry of Communications.
We provide shipping agency services to a variety of vessel sizes and types, including Handysize, Panamax, Capesize, Roll-On/Roll-Off
RORO, and VLCC class vessels. We assist clients with a variety of shipping requirements, including bulk and break-bulk general cargo, vehicle
transport and raw materials such as crude oil and oil products and iron, manganese and other metal ores.
Market Background
Since China adopted its open door trade policy in 1978, inviting foreign investment into China, China’s economy has steadily developed,
both from new investments in China and from increased international trade. As international trade between China and other countries has
expanded, the shipping industry in China has also grown.
1
The evolution of the shipping agency industry has followed that of the shipping industry in general. Prior to the 1980s, China’s shipping
agency industry was dominated by a single state-owned shipping agency, China Ocean Shipping Agency Co. Limited (Penavico). In 1985, a
second shipping state-owned shipping agency, China Marine Shipping Agency Co. Limited (Sinoagent), was permitted to provide shipping
agency services to foreign ships discharging a port in China. In 1995, the third largest state-owned shipping agency, China Shipping Agency Co.
Ltd (CSA), followed by COSCO Container Shipping Agency Co. Ltd (Cosa) established in 1999.
Since 1985, the PRC has taken a number of steps to open China’s shipping agency industry to private companies. In 1990, the PRC
adopted the International Ship Agency Management and Stipulation, which allowed state-owned companies to compete in the shipping agency
industry. In 2002, the PRC further relaxed the restrictions on shipping agencies by promulgating the People’s Republic of China International
Marine Transportation Rule, which permitted Chinese private entities and joint ventures between Chinese and foreign entities to compete in the
shipping agency industry. The Chinese and American Marine Transportation Agreement in 2003 and the New Round Chinese and European
Union Marine Transportation Agreement in 2002 allowed shipping transportation enterprises that were wholly owned by American and
European Union businesses, respectively, to provide shipping agency service for their parent companies.
We believe that there are over 1,900 licensed shipping agencies in China. At present, the state-owned shipping agency companies, namely
Penavico, Sinoagent, CSA and Cosa, still dominate China’s shipping agency industry, combining to generate approximately 85% of the revenues
in the industry. The remaining approved shipping agencies in operation share the remaining 15% of revenues in the industry.
We are well positioned between the state-owned agency giants and numerous small agents, becoming the leading non-government owned
shipping agency service provider in China. This enables us to have a competitive advantage of applying more flexible strategies for our business
development under uncertain economy environment.
Our Strategy
Our goals are to increase our market share in the PRC shipping agency market and to expand our business to related service areas. We
believe we can meet these goals by continuing to focus on the high quality of our personnel, the positive relationships we enjoy with local ports,
businesses and agencies and the breadth of services we offer to clients. Key elements of our strategy include the following:
• Increase our market share. We believe we have advantages over smaller shipping agencies in terms of infrastructure, administration
and services we can offer to clients. As a result, we believe we are able to compete on the basis of service with these smaller agencies. In order to
continue to increase our market share in China, we will focus on demonstrating to potential clients that typically use the larger shipping agents
that we are able to provide a high level of service. Potential customers in the shipping industry are strongly influenced by formal and informal
references. We believe that we have the opportunity to expand our market share by providing high levels of customer satisfaction with our
current customers so that they continue to use our services and recommend our shipping agency services to other potential customers that wish to
ship to China. We have obtained ISO9000 and UKAS certifications from the International Organization for Standardization and the United
Kingdom Accreditation Service, respectively, in recognition of the quality of services we provide. Each of these organizations assesses the
effectiveness of quality management systems implemented by companies. The International Organization for Standardization consists of a
worldwide federation of national standards bodies for approximately 130 countries, and the ISO9000 certification represents an international
consensus of these standards bodies, with the aim of creating global standards of product and service quality. UKAS is the sole national body in
the United Kingdom recognized by the government to provide accreditation of conformity assessment bodies. UKAS and ISO9000 certifications
address the quality of systems only and do not certify the quality of products or services themselves.
2
• Develop a shipping agency network in China and internationally. We acknowledge that shipping agency is a productive process
related to both a loading port and a discharge port. As such, we believe the most cost effective way to develop our business is to build an
international network that covers our clients’ shipping routes from their loading ports to their discharging ports. We have found a number of
benefits of being able to develop an international shipping agency network, including the following advantages:
o In addition to our agency services in China, we provide our clients with agency services at the overseas ports where their ships
load or discharge goods. From our network, our clients benefit from obtaining control on the shipping process. On the other hand,
we are able to generate the revenue from services we perform in the foreign ports and from services referred by the foreign partner
agents.
o Some of our customers are large Chinese steel manufacturers and traders that import a significant portion of iron ore from
overseas to China. Their needs in overseeing loading activities build up a foundation for us to establish an international shipping
agency network.
o We have developed strong relationships with local agents in China, including the largest Chinese local agency networks,
Penavico, Sinoagent and CSA. We signed a strategic cooperative agreement with Cosa, which has over 50 offices around ports in
China. This ensures that our customers have as many advantages possible in working through any complications;
o We have developed experience in establishing an international network. Since our IPO, we have contributed significant efforts in
building up strategic relationships with countries where China imports large volume of mining materials. We opened offices in
Australia and Hong Kong. We have signed strategic cooperative agreements with Monson Agency in Australia, Forbes in India,
Wilson Sons in Brazil and King Sons in South Africa. Our Hong Kong office also handles loading services in a port in Canada.
Along with developing the international agency network, the overseas loading services appear to be the fastest area contributing to
our business growth.
• React quickly to opportunities to offer new services to our clients. We believe that our Company is small enough to have close
working relationships with our customers. As a result, we believe we encourage our customers to raise any concerns, comments or
recommendations for additional services that they would like to see provided with our shipping agency services. We also believe that we are
large enough to implement many of these recommendations and strive to offer new services when we feel that the services will benefit our
customers.
• Maintain working relationships with third parties in port cities. We currently enjoy good working relationships with a variety of
entities that operate in commercial ports, including port authorities, tugboat companies, pilot stations, stevedore companies, customs agencies,
shipping agency associations and local government authorities.
Customers
We currently provide shipping agency services to a variety of international vessels. The majority of our customers are large Chinese steel
manufacturers, traders and international shipping companies that wish to ship goods to and from China. Our largest customer is Beijing
Shourong Forwarding Service Co., Ltd (“Shourong”), an affiliate of Capital Steel, a steel company in China. We provide shipping agency
services for all vessels carrying iron ore for Capital Steel. Revenues from this company accounted for approximately 63% and 54% of our
revenues in 2013 and 2012, respectively. In line with the restructuring of the Chinese steel industry, our agency contract with Shourong has been
under review and we have not provided agency services for its vessels discharging in a Chinese port since July 1, 2013. However, our agency
services to Shourong vessels loading at overseas ports continues. We are working with Shourong to sign a new agency agreement. On June 27,
2013, we signed a 5-year global logistic service agreement with TEWOO Chemical & Light Industry Zhiyuan Trade Co., Ltd and TianJin Zhi
Yuan Investment Group Co., Ltd (together “Zhiyuan”). We expect to generate major revenues from Zhiyuan for fiscal 2014 and forward.
3
In addition to these companies, we provide shipping agency services to a variety of shipping companies from Germany, Greece, Spain,
Italy, Hong Kong, Norway, Switzerland, the United States, Singapore, Japan and South Korea. We have provided shipping agencies services for
vessels carrying bulk and break-bulk cargoes, raw materials, consumer goods, and vehicles.
Our Strengths
We believe that the following strengths differentiate us from our competitors in China’s shipping agency industry:
• Experience in general shipping agency services . We are one of few shipping agents specialized in providing a full range of general
shipping agency services in China. Unlike a local agent who specializes in dealing with procedures when a vessel arrives or departs in a port, a
general agent focuses on serving clients’ needs for information about all ports for shipping arrangement, appointing local agents, coordinating
the local agent before, in process and after vessel arrival or departure, saving parking time and loading/discharging costs and sometimes taking
responsibilities for the vessel’s dispatch or demurrage. A general agent serves a larger client with shipments covering many local ports. We
believe that our experience in providing general agency services gives us a competitive advantage in attracting large clients and helps us
maintain the client business for longer periods of time once our tenders are successful.
• Strength of personnel and administration . Most of our employees have marine business working experience, and all of our
managers/chief operators once served in either Penavico or Sinoagent prior to joining our Company. With these professionals and experienced
staff, we believe that we can provide competitive services to our customers.
• Reputation for reliability and responsiveness to customer requests . Our operators are constantly on duty so that we can respond
quickly to any customer’s inquiries regardless of any time difference between our customers and us. Our marketing staff also pays regular visits
to customers so that we can continually improve our services in response to customer feedback.
• Reputation for financial responsibility . In order to engage in business in China as a shipping agency, we must demonstrate financial
responsibility to customers, our business partners, ports and local governmental agencies. We believe our ability to meet our financial
obligations has encouraged customers to choose to do business with us and has resulted in the growth of a strong network of service partners in
the 76 ports in which we provide shipping agency services.
• Strength of information management system . We consistently collect and update port information from local ports so that we can share
current and accurate port information with our clients through our network. Our newly developed management information system is based on
SAP B-One software, which enables us to record more accurate and updated commercial and accounting information.
• Quality of services provided to customers . Unlike agencies that provide local agent services in one particular port, we provide our
customers with both general agent and local agent services in all of China’s commercial ports. Our general agent services provide our customers
with accurate port information, which helps our customers make their way smoothly through loading and discharging cargo. Our local agent
services have generally resulted in shorter port stays and faster working rates for our customers’ ships, reducing their overall port charges.
• Positive relationships with third parties in local ports . In local ports, we maintain positive relationships with stevedore companies,
pilot stations, towage companies and other local service providers, which helps our customers enjoy faster loading and discharging rates and a
smoother berthing and unberthing process.
• Strong network of local shipping agents in ports without branch offices . In addition to having branch offices in five major Chinese
commercial ports, we also have a strong network of other shipping agents. Using feedback from customers and our knowledge of the Chinese
shipping agency industry, we can compare and select the most competitive agents as our local agents.
4
Our Challenges
The successful execution of our strategies is subject to certain risks and uncertainties, including those relating to:
• our limited operating history in general and our recent uncertain profitability;
• limited funds with which to build a nationwide and worldwide port network in China, to recruit and retain quality personnel, to
advertise our services and to develop new information technology for use in providing shipping agency services;
• the growth of the shipping agency industry in China and the entrance of new Chinese and foreign competitors into the market;
• our ability to respond to competitive pressures; and
• regulatory environment in China.
Competition
Our ability to be successful in our industry depends on our ability to compete effectively with companies that may be more well-
capitalized than we are or may provide shipping agency services we do not or cannot provide to our customers. While China’s shipping agency
industry has a variety of small shipping agencies, our primary competitors are Penavico, Sinoagent and CSA. These companies are state-owned
in part and much larger than we are and derive significantly more revenue from shipping agency services in China.
• Penavico . Founded in 1953, Penavico is the oldest and largest state-owned shipping agency in China. Beginning in 1955, Penavico
took over China’s shipping agency business from the foreign agents that previously did business in China and, until 1985, Penavico was the only
shipping agency operating in China. Penavico now has more than 80 local agencies and 300 business networks across China. Penavico maintains
offices in America, Europe, Japan, Korea, Singapore and Hong Kong. Penavico’s shipping agency business, bulk ships and container ships
currently account for approximately 40% of China’s market.
• Sinoagent . Sinoagent was formed in 1985 as a specialized subsidiary of Sinotrans Limited Company (“Sinotrans”), a company that
provides integrated ocean transportation, land transport, airfreight, warehousing, express services, shipping agency and freight forwarding
services. Due to its relationship with Sinotrans, Sinoagent is able to provide a seamless, integrated set of services to its customers. Sinoagent is
the second largest state-owned shipping agency and has approximately 30% of shipping agency market in China.
• CSA . CSA was established in 1997 and affiliates to China Shipping Group, specializing in shipping agency business for both domestic
and international vessels and concurrently in other related business such as cargo agency and customs declaration. With the headquarter in
Shanghai, CSA has set up more than 54 subsidiaries in major ports along the national coastline, the Yangtze River and the Pearl River of China.
The subsidiaries undertake shipping agency business as well as cargo agency business and customs declaration etc. for both Chinese and foreign
vessels navigating among the international lines and the vessels calling HK, Macao, Taiwan areas, and the coastlines and other water areas of
China.
We believe that the three shipping agents’ primary strengths include the following:
• the establishment of a complete port network in mainland China;
• the presence of a large base of clients; and
• the availability of funding and financial support from state-owned financial institutions.
5
Regulations on Foreign Exchange
Foreign Currency Exchange . Pursuant to the Foreign Currency Administration Rules promulgated in 1996 , as amended in 2007 and
2008, and various regulations issued by State Administration of Foreign Exchange (“SAFE”), and other relevant PRC government authorities,
RMB is freely convertible only to the extent of current account items, such as trade related receipts and payments, interests and dividends.
Capital account items, such as direct equity investments, loans and repatriation of investment, require prior approval from SAFE or its provincial
branch for conversion of RMB into a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside the PRC. Payments
for transactions that take place within the PRC must be made in RMB. Unless otherwise approved, PRC companies must repatriate foreign
currency payments received from abroad. Foreign-invested enterprises may retain foreign exchange in accounts with designated foreign
exchange banks subject to a cap set by SAFE or its local counterpart. Unless otherwise approved, domestic enterprises must convert all of their
foreign currency receipts into RMB.
Dividend Distribution . The principal regulations governing divided distributions by wholly foreign-owned enterprises and Sino-foreign
equity joint ventures include:
• Wholly Foreign-Owned Enterprise Law (1986), as amended;
• Wholly Foreign-Owned Enterprise Law Implementing Rules (1990), as amended;
• Sino-Foreign Equity Joint Venture Enterprise Law (1979), as amended; and
• Sino-Foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended.
Under these regulations, wholly foreign-owned enterprises and Sino-foreign equity joint ventures in the PRC may pay dividends only out
of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, these foreign-
invested enterprises are required to set aside certain amounts of their accumulated profits each year, if any, to fund certain reserve funds. These
reserves are not distributable as cash dividends.
Regulation of foreign exchange in certain onshore and offshore transactions . Under recent notices issued by SAFE, PRC residents are
required to register with and receive approvals from SAFE in connection with offshore investment activities. SAFE has stated that the purpose of
these notices is to ensure the proper balance of foreign exchange and the standardization of cross-border flow of funds.
In January 2005, SAFE issued a notice stating that SAFE approval is required for any sale or transfer by PRC residents of a PRC
company’s assets or equity interests to foreign entities in exchange for the equity interests or assets of the foreign entities. The notice also states
that, when registering with the foreign exchange authorities, a PRC company acquired by an offshore company must clarify whether the offshore
company is controlled or owned by PRC residents and whether there is any share or asset link between or among the parties to the acquisition
transaction.
In April 2005, SAFE issued another notice further explaining and expanding upon the January notice. The April notice clarified that,
where a PRC company is acquired by an offshore company in which PRC residents directly or indirectly hold shares, such PRC residents must
(i) register with the local SAFE branch regarding their respective ownership interests in the offshore company, even if the transaction occurred
prior to the January notice, and (ii) file amendments to such registration concerning any material events of the offshore company, such as
changes in share capital and share transfers. The April notice also expanded the statutory definition of the term “foreign acquisition,” making the
notices applicable to any transaction that results in PRC residents directly or indirectly holding shares in the offshore company that has an
ownership interest in a PRC company. The April notice also provided that failure to comply with the registration procedures set forth therein
may result in the imposition of restrictions on the PRC company’s foreign exchange activities and its ability to distribute profits to its offshore
parent company.
On October 21, 2005, SAFE issued a new public notice concerning PRC residents’ investments through offshore investment vehicles.
This notice took effect on November 1, 2005 and replaces prior SAFE notices on this topic. According to the November 2005 notice:
• any PRC resident that created an off-shore holding company structure prior to the effective date of the November notice must submit a
registration form to a local SAFE branch to register his or her ownership interest in the offshore company on or before May 31, 2006;
• any PRC resident that purchases shares in a public offering of a foreign company would also be required to register such shares an
notify SAFE of any change of their ownership interest; and
6
• following the completion of an off-shore financing, any PRC shareholder may transfer proceeds from the financing into China for use
within China.
In accordance with the October 2005 notice, on December 12, 2007, Mr. Cao Lei and Mr. Zhang Mingwei obtained appropriate
registration from their local SAFE offices.
Employees
As of the date of filing of this report, we have 33 employees, 25 of whom are based in China. Of the total, 3 are in management, 10 are in
operation, 9 are in financial affairs, and 11 in administration and technical support. We believe that our relationship with our employees is good.
We have never had a work stoppage, and our employees are not subject to a collective bargaining agreement.
Item 1A. Risk Factors.
The Company is not required to provide the information required by this Item because the Company is a smaller reporting company.
Item 1B. Unresolved Staff Comments.
The Company is not required to provide the information required by this Item because the Company is a smaller reporting company.
Item 2. Properties.
We currently rent six (6) facilities throughout China, HongKong and the United States. Our headquarters are located in Beijing.
Office
Beijing, PRC
Shanghai, PRC
Flushing, NY
Hong Kong
Address
Room 212, Tower C
YeQing Plaza
No. 9, Wangjing North Road
Chaoyang District
Beijing, PRC 100102
Rental Term
Expires 10/31/2013
Space
207 m 2
Rm 12B1/12C, No.359 Dongdaming.Road,
Hongkou District, Shanghai, PRC 200080
Expires 05/31/2014
145 m 2
136-56 39th Avenue,
Room #305, Flushing, New York 11354
20/F, Hoi Kiu Commercial Building, 158
Connaught Road Central, HK
Expires 09/30/2014
150 m 2
Expires 05/17/2015
77 m 2
Item 3. Legal Proceedings.
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm
our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our
business, financial condition or operating results.
7
Item 4. Mine Safety Disclosures.
This item is inapplicable to the Company.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for Our Common Stock
Our common stock is traded on the NASDAQ Stock Market under the symbol SINO. As of June 30, 2013, there were four holders of
record of our common stock. This number excludes our common stock owned by shareholders holding common stock under nominee security
position listings. The high and low common stock sales prices per share during the periods indicated were as follows:
Quarter Ended
Sep. 30
Dec. 31
Mar. 31
June 30
Year
Fiscal year 2013
Common stock price per share:
High
Low
Fiscal year 2012
Common stock price per share:
High
Low
$
$
$
$
2.73 $
1.85 $
2.49 $
1.30 $
2.75 $
1.71 $
1.89 $
1.24 $
2.75
1.24
9.16 $
1.38 $
3.99 $
1.59 $
4.28 $
2.14 $
5.73 $
2.15 $
9.16
1.38
Approximate Number of Holders of Our Common Stock
As of the date of this report there are four holders of record of our common stock.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We anticipate that we will retain any earnings to support
operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable
future. Any future determination relating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a
number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the Board of
Directors may deem relevant. Payments of dividends by Trans Pacific to our company are subject to restrictions including primarily the
restriction that foreign invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign
exchange business after providing valid commercial documents.
Compliance with Listing Rule 5550((b)(1)
We received a notification letter from NASDAQ dated November 21, 2012, regarding the noncompliance with the NASDAQ Capital
Market Listing Rule 5550(b)(1) of maintaining a minimum of $2,500,000 in shareholders’ equity. In accordance with the instruction provided in
the notification latter, we responded to NASDAQ, applying for a full extension together with a plan to regain compliance with the Listing Rule
5550(b)(1). The application for the 180 day full extension was granted by NASDAQ on January 24, 2013, allowing us to implement our plan on
or before May 20, 2013. On April 19, 2013, our shareholders general meeting voted and approved the issuance of 1,800,000 new shares at
market price to Mr. Zhang Zhong. We received the proceeds from the equity financing in April. Consequently, we returned to compliance with
NASDAQ Capital Market Listing Rule 5550(b)(1), in accordance with the letter from NASDAQ on May 27, 2013.
8
Item 6. Selected Financial Data
The Company is not required to provide the information required by this Item because the Company is a smaller reporting company.
Item 7. Management’s Discussion and Analysis or Plan of Operation.
The following discussion and analysis of our company’s financial condition and results of operations should be read in conjunction
with our audited consolidated financial statements and the related notes included elsewhere in the Annual Report. This discussion contains
forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from
those anticipated in these forward-looking statements as a result of various factors.
Overview
We are a shipping agency service provider for ships coming to and departing from Chinese ports. Our company was incorporated in
New York in February 2001. On September 18, 2007, we amended the Articles of Incorporation and Bylaws of our New York corporation to
merge into a new Virginia corporation, Sino-Global Shipping America, Ltd.
Our principal geographic market is in the People’s Republic of China (“PRC”). As PRC laws and regulations restrict foreign ownership
of shipping agency service businesses, we operate our business in the PRC through Sino-Global Shipping Agency, Ltd. (“Sino-China”), a PRC
limited liability company wholly owned by our founder and Chief Executive Officer, Cao Lei, and Chief Financial Officer, Zhang Mingwei,
both of whom are PRC citizens. Sino-China holds the licenses and permits necessary to provide shipping services in the PRC. Headquartered in
Beijing with branches in Qingdao, Qinhuangdao and Fangchenggang, we provide general shipping agency services in all commercial ports in
China.
On November 13, 2007, the Company formed a wholly owned foreign-owned enterprise, Trans Pacific Shipping Limited (“Trans
Pacific Beijing”), which invested in one 90%-owned subsidiary on May 31, 2009, Trans Pacific Logistics Shanghai Limited (“Trans Pacific
Shanghai”. Trans Pacific Beijing and Trans Pacific Shanghai are referred to collectively as “Trans Pacific”).
Trans Pacific Beijing and Sino-China do not have a parent-subsidiary relationship. Trans Pacific Beijing has contractual arrangements
with Sino-China and its shareholders that enable the Company to substantially control Sino-China.
For the purpose of building up an international shipping agency service network, we formed a wholly-owned subsidiary, Sino-Global
Shipping Australia Pty Ltd. (“Sino-Global AUS”) in Perth, Australia on July 3, 2008, which serves the needs of customers shipping into and out
of Western Australia. The Company also signed an agreement with Monson Agencies Australia (“Monson”), one of the largest shipping agency
service providers in Australia. Through the Company’s relationship with Monson, the Company is able to provide general shipping agency
services to all ports in Australia.
We established another wholly-owned subsidiary, Sino-Global Shipping (HK) Limited (“Sino-Global HK”) on September 22, 2008.
Sino-Global HK is our control and management center for southern Chinese ports and enables our company to extend its offering of
comprehensive shipping agency services to vessels going to and from one of the world’s busiest ports. On July 27, 2009, Sino-Global HK signed
an exclusive partnership agreement with Forbes & Company Limited (“Forbes”), which is a listed company on the Bombay Stock Exchange
(BOM: 502865) and one of the largest shipping and logistic service providers in India. Through our relationship with Forbes, we are able to
provide general shipping agency services to all ports in India.
9
We established a wholly-owned subsidiary, Sino-Global Shipping Canada Inc. (“Sino-Global Canada”) at the end of 2012, to provide
services for ships loading commodities at Canadian ports. Sino-Global Canada has already commenced providing services to Baosteel's vessels
in Canada.
The Company established a new wholly-owned subsidiary, Sino-Global Shipping New York Inc. in May 2013, to facilitate the
development of an integrated overseas and local shipping agency network to help generate new business referral activities.
On July 5, 2011, Sino-China signed a Strategic Cooperative Agreement with COSCO Container Shipping Agency Co. Limited, one of
the largest state-owned shipping agents in China. The Agreement entitles us to use COSCO Container Shipping Agency’s name to market
business in China and overseas. In addition, we are able to provide shipping agency services through over 50 COSCO’s offices in China.
Currently we are executing this agreement with COSCO.
On October 12, 2011, the Company signed a Memorandum of Understanding with King & Sons Shipping Agency (“King & Sons”),
subsidiary of Grindrod Limited, a public company listed on the Johannesburg Securities Exchange (JSE: GNDP) and one of the oldest shipping
agents in South Africa. Through the Company’s relationship with King & Sons, it is able to provide general shipping agency services to all ports
in South Africa.
On November 8, 2011, the Company signed a Memorandum of Understanding with Wilson Sons Shipping Agency (“Wilson Sons”),
the oldest and the leading independent Brazilian ship agent. Through the Company’s relationship with Wilson Sons, it is able to provide general
shipping agency services to all ports in Brazil.
On June 27, 2013, the Company signed a 5-year global logistic service agreement on June 27, 2013 with TEWOO Chemical & Light
Industry Zhiyuan Trade Co., Ltd and TianJin Zhi Yuan Investment Group Co., Ltd (together "Zhiyuan"). Under the terms of the agreement,
Sino-Global will serve as Zhiyuan's exclusive global logistics service provider in charge of cargo import and export issues.
Revenues
China’s economy has slowed down since the second half of 2012 resulting in reduced volume of iron ore import. The number of ships
we served decreased from 477 to 438 for the years ended June 30, 2012 and 2013, respectively. In addition, our major customer, Beijing
Shourong Forwarding Services Co. Ltd. (“Shourong”), has changed its service arrangement with our Company since January 2013, from the
lump sum fix rate discharging agency services to the protective agency services, for its ships discharging at a Chinese port. Because protective
services generate much lower agency revenues per ship, our total revenues decreased from $33.88 million down to $17.33 million from the year
ended June 30, 2012 to the year ended June 30, 2013.
Number of ships served
Loading/discharging
Protective
Total
For the years ended June 30,
2013
2012
Diff.
%
161
277
438
363
114
477
(202)
163
(39)
(55.65)
142.98
(8.18)
The revenues recorded in Sino-China are subject to a 5% business tax as well as an additional 0.5% surcharge after deducting the costs
of services. We deduct these business taxes and related surcharges from our gross revenues to arrive at our total revenues.
The Chinese Ministry of Finance and the State Administration of Taxation jointly set out the Value Added Tax (VAT) reform plan,
which will see the business taxes replaced by VAT commencing from Shanghai on January 1, 2012, and then be extended to all other provinces
and autonomies in mainland China. As we recorded most of our revenues outside of China, there is little effect of ongoing VAT reform to our
operating results.
10
In general, we provide two types of shipping agency services, namely loading/discharging services and protective services. For
protective agency services, we charge fixed fees while our customers are responsible for the payment of port costs and expenses. For
loading/discharging agency services, we receive the total amount from our customers and pay the port charges on our customers’ behalf. Under
these circumstances, we charge shipping agency fees in two ways: (1) the lump sum amount is predetermined with a customer, and (2) the cost-
plus fees are calculated based on the actual costs incurred plus a markup. We generally require payments in advance from customers and bill
them the balances within 30 days after the transactions are completed.
We believe the most significant factors that directly or indirectly affect our shipping agency service revenues are:
¤
¤
¤
¤
¤
¤
the number of ships to which we provide port loading/discharging services;
the size and types of ships we serve;
the type of services we provide, for example loading/discharging, protective, owner’s affairs;
the rate of service fees we charge;
the number of ports at which we provide services; and
the number of customers we serve.
Historically, our services have primarily been driven by the increase in the number of ships and customers, provided that the rate of
service fees is determined by market competition. We believe that an increase in the number of ports served generally leads to an increase in the
number of ships and customers. We expect that we will continue to earn a substantial majority of our revenues from our shipping agency
services. As a result, we plan to continue to focus most of our resources on expanding our business to cover more ports in the PRC and overseas.
In addition, we will allocate our resources in marketing our brand to customers, including ship owners and charters, which transport goods from
all ports around the world to China. We believe that our diversified focus on loading and discharging cargo in both Chinese and overseas ports
will enable us to grow and manage the exchange rate risk associated with the trend of the U.S. dollar’s devaluation against the RMB because our
overseas revenues and port charges are normally paid in foreign currencies. To the extent these other foreign currencies devalue against the
RMB, of course, we would still face exchange rate risks.
Operating Costs and Expenses
Our operating costs and expenses consist of costs of revenues, general and administrative expenses, selling expenses. Our total
operating costs and expenses decreased in absolute amount, but increased as a percentage of total revenues for the year ended June 30, 2013
compared to the same periods ended June 30, 2012. The following table sets forth the components of our Company’s costs and expenses for the
periods indicated.
2013
For the years ended June 30,
2012
Change
US$
%
US$
%
US$
%
Revenues
17,331,759
100.00 33,881,248
100.00 (16,549,489)
(48.85)
Costs and expenses
Cost of revenues
15,402,743
88.87 31,184,331
92.04 (15,781,588)
(50.61)
General and administrative expense
Selling expense
Total costs and expenses
3,878,569
253,987
19,535,299
22.38
1.47
5,236,167
385,064
112.71 36,805,562
15.45
1.14
(1,357,598)
(131,077)
108.63 (17,270,263)
(25.93)
(34.04)
(46.92)
11
Costs of Revenues. Costs of revenues represent the expenses incurred in the periods when a ship docks in a harbor to load and
discharge cargo. We believe the most significant factors that directly or indirectly affect our costs of revenues are:
¤
¤
¤
¤
¤
¤
¤
the number of ships to which we provide port loading/discharging services;
the size of ships we serve, as large ship requires more towboats to park at harbor;
the nationality of ships we serve, as a foreign ship pays different tonnage taxes;
the complexity of service processing;
the operating condition of a particular port for ships loading or discharging;
the number of days a ship loading or discharging; and
the number of days ships loading or discharging during overtime period and public holidays.
We typically pay the costs of revenues on behalf of our customers for non-protective services. Except for Australia and Canada where
our revenues and costs are settled in the local currencies, we receive most revenues from our clients in U.S. dollars and pay most costs of
revenues to the local port agents in local currency, for example RMB in China. As such, the costs of revenues will change if the foreign currency
exchange rates change.
Our costs of revenues as a percentage of our total revenues decreased from 92.04% for the year ended June 30, 2012 down to 88.87%
for the year ended June 30, 2013. Consequently, our gross margin increased from 7.96% for the year ended June 30, 2012 up to 11.13% for the
year ended on June 30, 2013. The gross margin increased because we provided protective services to more ships, which had generated higher
gross margin compared to loading/discharging services.
Revenues ($)
Loading/discharging
Protective
Costs of revenues ($)
Loading/discharging
Protective
Gross profits ($)
Loading/discharging
Protective
Gross margin (%)
Loading/discharging
Protective
For the years ended June 30,
2013
17,331,759
16,706,787
624,972
2012
33,881,248
33,750,277
130,971
Diff.
(16,549,489)
(17,043,490)
494,001
15,402,743
15,261,719
141,024
31,184,331
31,131,898
52,433
(15,781,588)
(15,870,179)
88,591
1,929,016
1,445,068
483,948
2,696,917
2,618,379
78,538
(767,901)
(1,173,311)
405,410
11.13
8.65
77.44
7.96
7.76
59.97
3.17
0.89
17.47
General and Administrative Expenses. Our general and administrative expenses primarily consist of salaries and benefits for our staff
(both operating and administrative personnel), business promotion, depreciation expenses, office rental expenses and expenses for legal,
accounting and other professional services. For the year ended June 30, 2013, our general and administrative expenses as a percentage of our
total revenues increased from 15.45% to 22.38% compared to the year ended June 30, 2012, mainly due to sharply decreased revenues. On the
other hand, our general and administrative expenses reduced by $1.36 million, representing a decrease of 25.93% compared to the last fiscal year
of 2012.
Selling Expenses. Our selling expenses primarily consist of commissions and traveling expenses for our operating staff to the ports at
which we provide services. Because of the decrease in our revenues, our selling expenses decreased in absolute amount but increased as a
percentage of our total net revenues for the year ended June 30, 2013 compared to the year ended June 30, 2012.
12
Critical Accounting Policies
We prepare the consolidated financial statements in accordance with accounting principles generally accepted in the United States of
America (“US GAAP”). These accounting principles require us to make judgments, estimates and assumptions on the reported amounts of assets
and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. We continually
evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other
conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable.
The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the
sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial
statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our
consolidated financial statements.
Revenue Recognition
Revenue comprises the value of charges for the services in the ordinary course of our company’s activities and disbursements made on
behalf of customers. Revenues are recognized from shipping agency services upon completion of the services, which generally coincides with
the date of departure of the relevant vessel from port. Advance payments and deposits received from customers prior to the provision of services
and recognition of the related revenues are presented as current liabilities.
Some contracts provide that revenues are recognized as a mark up of actual costs incurred. In a situation where the services are
completed but the information on the actual expenses is not available at the end of the fiscal year, the Company estimates revenues and costs
based on its previous experience for the revenues of the same kind of vessels, port charges on the vessel’s particulars/movement and cost rate of
the port. The estimated revenues and costs also incorporate additional costs incurred, such as extra weight taxes because of extended parking
time at a harbor, additional tow boats used because of inclement weather, overtime during public holidays, etc. The estimated costs of revenue
are based on the cost information provided by the local port and /or the Company’s historical experience of similar transactions.
The Company reports its revenue on the amounts billed to customers based on several criteria: (1) the Company assumes all credit risk
for the amounts billed to customers, (2) the Company has multiple suppliers for services ordered by customers and discretion to select the
supplier that provides the services, and (3) the Company determines the nature, type or specifications of the services ordered by customers and
the Company is responsible for fulfilling these services.
Basis of Consolidation
The consolidated financial statements include the accounts of the parent and its subsidiaries. All significant inter-company transaction
and balances are eliminated in consolidation. Sino-China is considered to be a Variable Interest Entity (VIE) and we are the primary beneficiary.
Our company through Trans Pacific entered into agreements with Sino-China, pursuant to which we receive 90% of Sino-China’s net income.
We do not receive any payment from Sino-China unless Sino-China recognizes net income during its fiscal year. These agreements do not entitle
us to any consideration if Sino-China incurs a net loss during its fiscal year. In accordance with the agreements, Sino-China pays consulting and
marketing fees equal to 85% and 5%, respectively, of its net income to our new wholly foreign-owned subsidiary, Trans Pacific, and Trans
Pacific supplies the technology and personnel needed to service Sino-China. Sino-China was designed to operate in China for the benefit of our
company.
The accounts of Sino-China are consolidated in the accompanying consolidated financial statements pursuant to Accounting Standard
Codification (“ASC”) 810-10, “Consolidation”. As a VIE, Sino-China’s sales are included in our total sales, its income (loss) from operations is
consolidated with our company’s, and our net income (loss) from continuing operations before non-controlling interest in income (loss) includes
all of Sino-China’s net income (loss). Our non-controlling interest in its income (loss) is then subtracted in calculating the net income (loss)
attributable to our company. Because of the contractual arrangements, our company had a pecuniary interest in Sino-China that requires
consolidation of our and Sino-China’s financial statements.
13
Accounts Receivable and Advances
Accounts receivable are recognized at net realizable value. We maintain allowances for doubtful accounts for estimated losses resulting
from the failure of customers to make required payments in the relevant time period. We review the accounts receivable on a periodic basis and
record general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of
individual receivable balances, we consider many factors, including the age of the balance, the customer’s historical payment history, its current
credit-worthiness and current economic trends. Receivables are considered past due after 365 days. Accounts are written off only after
exhaustive collection efforts. Because of the worldwide financial crisis, we have experienced difficulties in collecting cash from some of our
customers.
We generally obtain advance payment of our shipping agency fees prior to providing service to our clients. This significantly reduces
the amount of accounts receivable when the shipping agency fees are recognized. To the extent our estimates are insufficient; we bill our clients
for the balance which is expected to be paid within 30 days.
We use advance payments to pay a number of fees on behalf of our clients before their ships arrive in port, including harbor, berthing,
mooring/unmooring, tonnage, immigration, quarantine and tug hire fees. We record the amounts we receive as Advances from Customers and
the amounts we pay as Advances to Suppliers. We recognize revenues and expenses once the client’s ship leaves the harbor and the client pays
any outstanding amounts. In some cases, a delay in receiving bills will require us to estimate the Service Revenues and Costs of Services in
accordance with the rate and formulas approved by the Ministry of Communications. When this happens, we record the difference between
Service Revenues (as recognized) and Advances from Customers as Accounts Receivable and the difference between Cost of Services and
Advances to Suppliers as Accounts Payable. To the extent we recognize revenues and costs in this way, our Accounts Receivable and Accounts
Payable will reflect this estimation until we receive the bills and information we require to adjust revenues and expenses to reflect our actual
Service Revenues and Cost of Services. Any adjustment to actual from the estimated Revenues and Cost of Services recorded has been and is
expected to be immaterial.
Translation of Foreign Currency
The accounts of our company and Sino-China are measured using the currency of the primary economic environment in which the
entity operates (the “functional currency”). Our functional currency is the U.S. dollar, while Trans Pacific and Sino-China report their financial
position and results of operations in Renminbi. The accompanying consolidated financial statements are presented in U.S. dollars. Foreign
currency transactions are translated into U.S. dollars using the fixed exchange rates in effect at the time of the transaction. Generally foreign
exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations. We
translate foreign currency financial statements of Sino-China, Trans Pacific, Sino-Global HK and Sino-Global AUS in accordance with ASC
830-10, “Foreign Currency Matters”. Assets and liabilities are translated at current exchange rates quoted by the People’s Bank of China at the
balance sheet dates and revenues and expenses are translated at average exchange rates in effect during the periods.
Taxation
Because we and Sino-China are incorporated in different jurisdictions, we file separate income tax returns. We are subject to income
and capital gains taxes in the United States. Additionally, dividend payments made by our company are subject to withholding tax in the United
States.
We follow the provisions of ASC 740-10, “Accounting for Income Taxes”, which addresses the determination of whether tax benefits
claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, we may recognize the tax
benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be
measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740-10 also
provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased
disclosures.
14
The implementation of ASC 740-10 resulted in no material liability for unrecognized tax benefits and no material change to the
beginning retained earnings of our company. Our company recognizes interest and penalties, if any, related to unrecognized tax benefits as
income tax expense in the Statement of Operations. We use the liability method of accounting for income taxes in accordance with US GAAP.
Deferred taxes, if any, are recognized for the future tax consequences of temporary differences between the tax basis of assets and liabilities and
their reported amounts in the consolidated financial statements. We may recognize the tax benefit from an uncertain tax position only if it is
more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater
than fifty percent likelihood of being realized upon ultimate settlement.
2014 Trends
Fiscal 2013 was a challenging year and we expect the difficult macroeconomic conditions to continue in Fiscal 2014. While our revenues
were down in Fiscal 2013, we made significant strides in improving our gross margin and reducing our overhead. Our top priority in Fiscal 2014
is to cut costs and focus on earnings and profitability as we reorganize our business and streamline our operations. In accordance with our
revised strategic plan, we will implement various business initiatives that are designed to strengthen our working capital and operating cash
flows as well as our ability to deliver sustainable quarterly earnings. Specifically, we are planning to:
• diversify our business and reduce our dependence on key customers such as Shourong;
• revise our cost structure to make it more scalable;
• reduce our overhead, especially our general and administrative expenses;
• monetize our business relationship with Zhiyuan to generate earnings from the logistic service business; and
• expand our revenue base by creating new business referral opportunities through our overseas and local shipping agency network.
We have signed a 5-year global logistic service agreement with Zhiyuan in June 2013 and will take advantage of this arrangement to expand
our service platform. As a small company with pressing priorities and limited resources, we will continue to leverage our cost control measures
to enhance our profitability as a protective agent and rely on our internal control structure to ensure compliance with applicable rules and
regulations.
Results of Operations
Year Ended June 30, 2013 Compared to Year Ended June 30, 2012
Revenues. Our total revenues decreased by 48.85% from $33,881,248 for the year ended June 30, 2012 to $17,331,759 in the
comparable year in 2013. The number of ships that generated revenues for us decreased from 477 for the year of fiscal 2012 to 438 for the
comparable period of fiscal 2013. More importantly, w e provided protective services for more ships, which generated significantly lower
revenues per ship. For the year ended June 30, 2013, we provided protective services to 277 ships, compared to 114 ships for the year of fiscal
2012. In contrast, we provided loading/discharging service to 161 and 363 ships for the years ended June 30, 2013 and 2012, respectively.
Total Operating Costs and Expenses. Our total operating costs and expenses decreased by 46.92% from $36,805,562 for the year
ended June 30, 2012 to $19,535,299 for the year ended June 30, 2013. This decrease was primarily due to decreases in our costs of revenues and
general and administrative expenses, as discussed below.
15
• Costs of Revenues. Our cost of revenues decreased by 50.61% from $31,184,331 for the year ended June 30, 2012 to $15,402,743
for the year ended June 30, 2013. The revenues decreased more slowly than costs of revenues and the gross margins increased
from 7.96% to 11.13% for the comparative years ended June 30, 2012 and 2013, respectively. The increase in gross margins was
mainly due from shift in revenue mix from lower margin loading/unloading services to higher margin protective services.
However, the devaluation of the U.S. dollar against the Chinese RMB resulted in a 1.18% decrease in gross margin. The average
foreign exchange rate was $1.00 to RMB 6.2458 for the year ended June 30, 2013 compared to $1.00 to RMB 6.3520 for the year
ended June 30, 2012, a 1.67% increase during the period.
• General and Administrative Expenses . Our general and administrative expenses decreased by 25.93% from $5,236,167 for the
year ended June 30, 2012 to $3,878,569 for the year ended June 30, 2013. This mainly due to (1) decreased office rent of
$140,198, (2) a decrease of $536,028 in business promotion, (3) decreased public company listing expenses of $224,400, (4)
decreased salaries and benefits for our staff of $494,630, (5) decreased travelling expense of $89,370. The decrease of general and
administrative expenses was offset by an increase of $351,493 in the bad debts provision. We will continue our budget control
efforts to reduce the general and administrative expenses as a percentage of total revenues.
• Selling Expenses . Our selling expenses decreased by 34.04% from $385,064 for the year ended June 30, 2012 to $253,987 for the
year ended June 30, 2013. Most selling expenses are commissions paid to business partners who refer shipping agency business to
us.
Operating Loss. We had an operating loss of $2,203,540 for the year ended June 30, 2013, compared to an operating loss of $2,924,314
for the comparable year ended June 30, 2012. The operating loss for the year of fiscal 2013 was decreased primarily due to the reduced costs of
revenues and general and administrative expenses.
Financial Income, Net. Our net financial expense was $15,520 for the year ended June 30, 2013, compared to our net financial income
of $46,169 for the year ended June 30, 2012. The net financial expense was derived largely from the foreign exchange income recognized in the
financial statement consolidation. Foreign exchange losses resulting from the settlement of foreign exchange transactions are recognized in the
consolidated statements of operations.
Taxation. Our income tax expense was $410,089 for the year ended June 30, 2013, compared to income tax benefits of $120,232 for
the year ended June 30, 2012. The income tax expense of $413,900 was deferred tax expense resulted from an increase of the valuation
allowance of deferred tax assets.
Net Loss. As a result of the foregoing, we had a net loss of $2,576,896 for the year ended June 30, 2013, compared to net loss of
$2,812,969 for the year ended June 30, 2012. After deduction of non-controlling interest in loss, net loss attributable to Sino-Global Shipping
America, Ltd. was $1,799,755 for the year ended June 30, 2013, compared to net loss of $1,768,075 for the year ended June 30, 2012. With
other comprehensive loss foreign currency translation, comprehensive loss was $1,707,657 for the year ended June 30, 2013 , compared to
comprehensive loss of $1,703,123 for the year ended June 30, 2012.
Liquidity and Capital Resources
Cash Flows and Working Capital
We have financed our operations primarily through cash flows from operations. As of June 30, 2013, we had $3,048,831 in cash and
cash equivalents. Our cash and cash equivalents primarily consist of cash on hand and cash in banks. We deposited approximately 94.65% of our
cash in banks in the USA, Australia, Canada and Hong Kong.
16
The following table sets forth a summary of our cash flows for the periods indicated:
Net cash (used in) provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
Operating Activities
For the years ended June 30,
2013
2012
$
(4,361,613) $
(50,931)
3,026,536
(1,384,502)
4,433,333
3,048,831
185,710
(42,680)
(569,474)
(445,495)
4,878,828
4,433,333
Net cash used in operating activities was $4,361,613 for the year ended June 30, 2013, compared to net cash provided by operating
activities of $185,710 for the comparable year in 2012. The increased use in operating cash flows is mainly attributable to a net loss of
$2,576,896 and a decrease in accounts payable of $4,247,905, offset by (1) an increase in advances from customers of $406,735, (2) an increase
in other current liabilities of $254,513, (3) a decrease in other receivables of $235,629, (4) a decrease in accounts receivables of $127,928, (5) a
decrease in advances to suppliers of $128,505, (6) adjustment on deferred tax assets of $413,900 and (7) provision for doubtful accounts of
$518,835. According to the agreement signed with Shourong, we should receive our fixed lump sum agency fees prior to our services to be
provided. This important term has been breached and Shourong had not paid our fees since September 2012. As of June 30, 2013, our net
accounts receivable from Shourong amounted to approximately $2.56 million, leveraged by approximately $2.72 million accounts payable to
local port agents for the shipping services related to Shourong. Through the date of this report, we are coordinating between Shourong and local
port agents to reach an acceptable settlement for all parties involved by which Shourong will pay the outstanding port charges directly to the
local port agents. On July 30, 2013, three fund transfer agency agreements were executed, whereby Shourong will pay directly to local port
agents approximately $1.8 million. As almost the all balance due from Shourong represents port charges, the unpaid amount from Shourong will
not damage our solvency.
Investing Activities
Net cash used in investing activities was $50,931 compared to net cash used in investing activities of $42,680 for the years ended June
30, 2013 and 2012, respectively. We made capital expenditures of $50,931 and $42,680 for the years ended June 30, 2013 and 2012,
representing 0.68% and 0.40% of our total assets, respectively.
Financing Activities
Net cash provided by financing activities was $3,026,536 for the year ended June 30, 2013 mainly from the issuance 1,800,000 shares
to Mr. Zhang Zhong on April 19, 2013, and offset by a decrease of non-controlling interest in majority-owned subsidiary.
Working Capital
Total working capital amounted to $2,740,260 as at June 30, 2013 compared to $1,753,974 as at June 30, 2012. Total current assets
decreased by $2,641,236 from $9,786,401 as at June 30, 2012 to $7,145,165 as at June 30, 2013. Decrease in total current assets is principally a
result of decrease in cash of approximately $1.38 million and decrease in accounts receivable of approximately $0.65 million.
Current liabilities amounted to $4,404,905 as at June 30, 2013, in comparison to $8,032,427 as at June 30, 2012. The decrease was
attributable mainly to a decrease in accounts payable of $4,247,905 resulting from payments made to port agents in the first two quarters of
2013, offset by an increase in other current liabilities of $254,513.
17
The current ratio increased from 1.22 at June 30, 2012 to 1.62 at June 30, 2013. The improvement in our current ratio was primarily due
to the decrease in our current liabilities especially for the decrease in accounts payable.
We believe that current cash, cash equivalents, and anticipated cash flow from operations will be sufficient to meet our anticipated cash
needs, including cash needs for working capital and capital expenditures, for at least the next 12 months. We may, however, require additional
cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If
our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities or borrow from banks. However,
financing may not be available in the amounts we need or on terms acceptable to us, if at all. The sale of additional equity securities, including
convertible debt securities, would dilute our shareholders. The incurrence of debt would divert cash from working capital and capital
expenditures to service debt obligations and could result in operating and financial covenants that would restrict our operations and our ability to
pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business, operations and
prospects may suffer.
Contractual Obligations and Commercial Commitments
We have leased certain office premises and apartments for employees under operating leases through May 17, 2015. Below is a
summary of our company’s contractual obligations and commitments as of June 30, 2013:
Contractual Obligations
Operating leases
Payment Due by Period
Total
Less than 1 year
1-3 years
More than 3
years
$
187,341 $
146,114 $
41,227 $
—
The Labor Contract Law of the People’s Republic of China requires employers to insure the liability of the severance payments if
employees are terminated and have been working for the employers for at least two years prior to January 1, 2008. The employers will be liable
for one month for severance pay for each year of the service provided by the employees. As of June 30, 2013, the Company has estimated its
severance payments of approximately $127,200, which has not been reflected in its consolidated financial statements, because management
cannot predict what the actual payment, if any, will be in the future.
Company Structure
We conduct our operations primarily through our wholly-owned subsidiaries, Trans Pacific, Sino-AUS and Sino-HK and our variable
interest entity, Sino-China. As a result, our ability to pay dividends and to finance any debt we may incur depends upon dividends paid by our
subsidiaries and management fees paid by Sino-China. If our subsidiaries incur debt on their own behalf in the future, the instruments governing
their debt may restrict their ability to pay dividends to us. In addition, Trans Pacific is permitted to pay dividends to us only out of its retained
earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, wholly foreign-owned enterprises
like Trans Pacific are required to set aside at least 10% of their after-tax profit each year to fund a statutory reserve until the amount of the
reserve reaches 50% of such entity’s registered capital.
To the extent Trans Pacific does not generate sufficient after-tax profits to fund this statutory reserve, its ability to pay dividends to us
may be limited. Although these statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in
excess of retained earnings of the respective companies, these reserve funds are not distributable as cash dividends except in the event of a
solvent liquidation of the companies. Other than as described in the previous sentences, China’s State Administration of Foreign Exchange
(“SAFE”) has approved the company structure between our company and Trans Pacific, and Trans Pacific is permitted to pay dividends to our
company.
18
Off-Balance Sheet Commitments and Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We
have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our
consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated
entity that serve as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The Company’s financial statements and the related notes, together with the report of Friedman LLP, are set forth following the signature
pages of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Company maintains a system of controls and procedures designed to ensure that information required to be disclosed by the issuer
in the reports that it files or submits under the Act (15 U.S.C. 78a et seq. ) is recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and
communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure. For the purpose of improving management efficiency and
effectiveness, the Company has completed the implementation of a new accounting and management information system using SAP Business
One software. During the new system implementation process, we ran the old information system and new SAP system in parallel. As a result,
the recording data and processing results were cross-checked and confirmed. Our company is currently utilizing the new system.
As of June 30, 2013, our company carried out an evaluation, under the supervision of and with the participation of management,
including our company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of our company’s
disclosure controls and procedures. Based on the foregoing, the chief executive officer and chief financial officer concluded that our company’s
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective in
timely alerting them to information required to be included in the Company’s periodic Securities and Exchange Commission filings.
19
Changes in Internal Control over Financial Reporting.
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange
Act of 1934) during the three or twelve months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those
policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the Company’s assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with U.S. GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the authorization of its
management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
Company’s assets that could have a material effect on the financial statements.
The Company’s management assessed the effectiveness of its internal control over financial reporting as of June 30, 2013. In making this
assessment, management used the 1992 framework set forth in the report entitled Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of
a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and
communication, and (v) monitoring. Based on this assessment, the Company’s management believes that, as of June 30, 2013, its internal control
over financing reporting is effective based on those criteria.
Item 9B. Other Information.
The Company has previously reported all information required to be disclosed during the fourth quarter of fiscal 2013 in a report on Form
8-K.
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Regulation S-K Item 401
Cao Lei
Chief Executive Officer and Director
Age — 49
Director since 2001
Mr. Cao is our Chief Executive Officer and a Director. Mr. Cao founded Sino-Global Shipping Agency Ltd. (“Sino-China”) in 2001
and has been the Chief Executive Officer since that time. Mr. Cao has been Chief Executive officer of our company since its formation. Prior to
founding Sino-China, Mr. Cao was a Chief Representative of Wagenborg-Lagenduk Scheepvaart BV, Holland, from 1992 – 1993, Director of
the Penavico-Beijing’s shipping agency from 1987 through 1992, and a seaman for Cosco-Hong Kong from 1984 through 1987. Mr. Cao
received his EMBA degree in 2009 from Shanghai Jiao Tong University. Mr. Cao was chosen as a director because he is the founder of our
company and we believe his knowledge of our company and years of experience in our industry give him the ability to guide our company as a
director.
20
Zhang Mingwei
Chief Financial Officer and Director
Age — 59
Director since 2007
Mr. Zhang has extensive knowledge and experience in accounting from the perspective as an academician and a practicing accountant.
Mr. Zhang joined our company as its Chief Financial Officer and a Director in September 2007. From May 2001 until December 2007, Mr.
Zhang was a partner in Baker Tilly China, an international public accounting firm. From July 1994 to June 2003, he served as a Lecturer at
Monash University in Australia. Mr. Zhang received a Bachelor’s degree and a Master’s degree in Accounting from Tianjin University of
Finance and Economics. He also received a Master’s degree in Commerce from The University of Newcastle. Mr. Zhang is a Certified
Management Accountant in Australia. Mr. Zhang was chosen as a director because of his financial experience and because he is an experienced
member of our management team with an in-depth awareness of our financial capabilities.
Wang Jing
Independent Director
Age — 64
Director since 2007
Mr. Wang joined our Board of Directors in 2007. Mr. Wang currently serves as Chief Economist to China Minsheng Banking Corp.,
Ltd. and has held this position since December 2002. Mr. Wang was a Chinese Project Advisor for the World Bank from 1990 until 1994. From
1998 through 2000, Mr. Wang was the vice director of Tianjin Security and Futures Supervision Office, in charge of initial public offerings and
listing companies. Mr. Wang is an independent director for Tianjin Binhai Energy & Development Co. Ltd., (Shenzhen Stock Exchange:
000695); Tianjin Marine Shipping Co., Ltd. (Shanghai Stock Exchange: 600751); and ReneSola Company (London Stock Exchange: SOLA).
Mr. Wang received a Bachelor degree in Economics from Tianjin University of Finance and Economics. Mr. Wang was chosen as a director
because of his economics background and experience working with public companies.
Dennis O. Laing
Independent Director
Age — 66
Director since 2007
Mr. Laing joined our Board of Directors in 2007. Mr. Laing has practiced law in Richmond, Virginia for over 30 years. Mr. Laing’s law
practice centers upon business and corporate law with a special interest in the energy, healthcare and technology sectors. Mr. Laing received a
bachelor’s degree in government from the University of Virginia and a law degree from the University of Richmond. Mr. Laing currently serves
as a director of eFuture Information Technology Inc., an enterprise solutions software and services company that is listed on the NASDAQ
Capital Market and Recon Technology, Ltd., an oil and gas automation services company that is listed on the NASDAQ Capital Market. Mr.
Laing has been chosen as a director because we believe his legal experience as well as his experience serving on the boards of other Chinese
companies listed in the U.S. will be beneficial to the guidance of our company.
21
Liu Tielang
Independent Director
Age — 53
Director since 2013
Dr. Liu, 53, currently serves as the vice president in charge of accounting and finance to China Sun-Trust Group Ltd. and has held this
position since 2001. Dr. Liu was a financial controller for Huaxing Group Ltd from 1998 to 2001. From 1996 through 1998, he was the chief
accountant of China Enterprise Consulting Co., Ltd. Before working in industry, Dr. Liu taught accounting and finance in a university for more
than ten years and has published tens of books and articles. Dr. Liu is a CPA in China. He received a PhD, master and bachelor degrees from
Tianjin University of Finance and Economics. Dr. Liu has been chosen to serve as a director because of his accounting and business knowledge
and experience in working with Chinese companies.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic
violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a
judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws,
or a finding of any violation of federal or state securities or commodities laws, any laws respecting financial institutions or insurance companies,
any law or regulation prohibiting mail or wire fraud in connection with any business entity or been subject to any disciplinary sanctions or orders
imposed by a stock, commodities or derivatives exchange or other self-regulatory organization, except for matters that were dismissed without
sanction or settlement. None of our directors, director nominees or executive officers has been involved in any transactions with us or any of our
directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Board Leadership Structure
Mr. Cao Lei currently holds both the positions of Chief Executive Officer and Chairman of the Board. These two positions have not
been consolidated into one position; Mr. Cao simply holds both positions at this time. The Board of Directors believes that Mr. Cao’s service as
both Chief Executive Officer and Chairman of the Board is in the best interests of the Company and its shareholders. Mr. Cao possesses detailed
and in-depth knowledge of the issues, opportunities and challenges facing the Company and its business and is thus best positioned to develop
agendas that ensure that the Board’s time and attention are focused on the most critical matters. His combined role enables decisive leadership,
ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the
Company’s shareholders, employees, customers and suppliers.
We do not have a lead independent director because of the foregoing reasons and also because we believe our independent directors are
encouraged to freely voice their opinions on a relatively small company board. We believe this leadership structure is appropriate because we are
a smaller reporting company as such we deem it appropriate to be able to benefit from the guidance of Mr. Cao as both our Chief Executive
Officer and Chairman of the Board.
Risk Oversight
Our Board of Directors plays a significant role in our risk oversight. The Board of Directors makes all relevant Company decisions. As
such, it is important for us to have our Chief Executive Officer serve on the Board as he plays a key role in the risk oversight of the Company.
As a smaller reporting company with a small board of directors, we believe it is appropriate to have the involvement and input of all of our
directors in risk oversight matters.
Section 16(a) Beneficial Ownership Reporting Compliance (Regulation S-K Item 405)
Except as set forth in the following paragraph, based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the
Company under 17 CFR 240.16a-3(e) during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with
respect to its most recent fiscal year, and any written representation referred to in paragraph (b)(1) of this section, the Company is not aware of
any director, officer, beneficial owner of more than ten percent of any class of equity securities of the Company registered pursuant to Section 12
that failed to file on a timely basis, as disclosed in the above Forms, reports required by Section 16(a) during the most recent fiscal year or prior
years.
22
Notwithstanding the foregoing, the Company has been advised that Zhang Mingwei, its Chief Financial Officer and director, failed to file
on a timely basis reports required by Section 16(a) in connection with a single instruction to sell 54,000 shares of common stock of the
Company. The June 13, 2013 instruction was partially carried out by Mr. Zhang’s broker over several sales, for an aggregate sale of 52,700
shares. A total of 1,300 shares of Mr. Zhang’s common stock remain unsold at the date of this filing. In addition, Mr. Zhang Zhong purchased
1,800,000 shares of the Company’s common stock after the Company’s shareholders approved such issuance. The shares were issued on or
about May 24, 2013.
Regulation S-K Item 406
The Company has adopted a Code of Ethics and has filed a copy of the Code of Ethics with the Commission.
Regulation S-K Item 407(c)(3)
None.
Regulation S-K Item 407(d)(4) and (5)
The Company has an audit committee, consisting solely of the Company’s independent directors, Tieliang Liu, Wang Jing and Dennis O.
Laing. Mr. Liu qualifies as the audit committee financial expert. The Company’s audit committee charter is available on the Company’s
website (www.sino-global.com) or directly at the following link: http://media.corporate-
ir.net/media_files/irol/22/221375/corpgov/AuditCommCharte09272008.pdf.
Item 11. Executive Compensation.
The following table shows the annual compensation paid by us to Mr. Cao Lei, our Principal Executive Officer, and Mr. Zhang Mingwei,
our Principal Accounting and Financial Officer, for the years ended June 30, 2013 and 2012. No other officer had a salary during either of the
previous two years of more than $100,000.
Summary Compensation Table
Name
Cao Lei, Principal Executive
Officer
Year
2013
2012
Salary
US$
150,811
198,550
Bonus
US$
Zhang Mingwei, Principal
Accounting and Financial Officer
2013
2012
75,999
131,309
-
-
Securities-based
Compensation
US$
0 (1)
0
0 (1)
0
All other
compensation
US$
Total
US$
150,811
- 198,550
75,999
- 131,309
(1)
We granted each of Mr. Cao and Mr. Zhang options to purchase 36,000 shares of our common stock for $7.75 per share. We granted
these options on May 20, 2008. Although we recognize $53,114 in compensation expense for these options as 10,800 options vested
for each of Mr. Cao and Mr. Zhang in fiscal 2013, changes in SEC disclosure requirements require us to disclose the grant date fair
value of these shares. As the grant was made in fiscal 2008, the amount is not reflected in this summary compensation table.
23
Director Compensation (1)
Name
Dennis Laing
Liu Tielang (3)
Wang Jing
Joseph Jhu (4)
Fees earned or
paid in cash
($)
Stock
awards
($)
Option
awards
($) (2)
All other
compensation
($)
13,000
4,000
13,000
9,000
0
0
0
0
0
20,100
0
0
0
0
0
0
Total
($)
13,000
24,100
13,000
9,000
(1) This table does not include Mr. Cao Lei, our Principal Executive Officer, or Mr. Zhang Mingwei, our Principal Financial and Accounting
Officer, who are both directors and named executive officers, because their compensation is fully reflected in the Summary
Compensation Table.
(2) We granted options to purchase 10,000 shares of our common stock to each of Mr. Dennis Laing, Mr. Wang Jing and Mr. Joseph Jhu on
May 20, 2008 and December 15, 2009. Although we recognized $14,754 for Mr. Dennis Laing and Mr. Wang Jing and $3,880 for Mr.
Liu Tielang in compensation expense such directors’ options in fiscal 2013, no value is reflected for the award in this table.
(3) Mr. Liu Tielang became a director on January 31, 2013 and received options to purchase 10,000 shares of our common stock. We have
recognized the full grant-date fair value of these options in the above table.
(4) Mr. Joseph Jhu resigned as a director on January 31, 2013. All options granted to Mr. Jhu have been forfeited.
Employment Agreements with the Company’s Named Executive Officers
Sino-China has employment agreements with each of Mr. Cao Lei and Mr. Zhang Mingwei. Both Mr. Cao’s and Mr. Zhang’s
employment agreements provide for long-term employment, without a definite term. Under Chinese law, these employment agreements may
only be terminated without cause and without penalty by providing notice of non-renewal one month prior to the date on which the employment
agreement are scheduled to expire. If we fail to provide this notice or if we wish to terminate an employment agreement in the absence of cause,
then we are obligated to pay the employee one month’s salary for each year we have employed the employee. We are, however, permitted to
terminate an employee for cause without penalty to our company, where the employee has committed a crime or the employee’s actions or
inactions have resulted in a material adverse effect to us.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Plan category
Equity compensation plans approved by security
holders
Equity compensation plans not approved by security
holders
Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights (a)
Weighted-average
exercise price of
outstanding options,
warrants and rights (b)
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
column (a)) (c)
102,000
$
—
24
6.90
—
0
—
Outstanding Equity Awards at Fiscal Year-End
Option Awards (1)
Name
(a)
Cao Lei, Principal Executive Officer
Zhang Mingwei, Principal Accounting and Financial Officer
Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options (#)
(d)
Number of
securities
underlying
unexercised
options (#)
exercisable
(b)
Number of
securities
underlying
unexercised
options (#)
unexercisable
(c)
Option
exercise
price
($)
(e)
Option
expiration
date
(f)
36,000
36,000
0
0
0 $
0 $
7.75 May 19, 2018
7.75 May 19, 2018
(1) Our Company has not made any stock awards. For this reason, we have excluded the following columns from this table: (g) Number of
shares or units of stock that have not vested (#); (h) Market value of shares of units of stock that have not vested ($); (i) Equity incentive
plan awards: Number of unearned shares, units or other rights that have not vested (#); and (j) Equity incentive plan awards: Market or
payout value of unearned shares, units or other rights that have not vested ($).
Name and Address
Mr. Cao Lei(1)
Mr. Zhang Mingwei(1)
Mr. Wang Jing (1)
Mr. Dennis O. Laing (1)
Mr. Liu Tieliang (1)
Total Officers and Directors (5 individuals)
Other Five Percent Shareholders
Mr. Zhang Zhong(5)
Mr. Daniel E. Kern(6)
______________
* Less than 1%.
Title of
Class
common
common
common
common
common
common
common
common
Amount of
Beneficial
Ownership
Percentage
Ownership
1,420,040 (2)
37,300 (2)
10,000 (3)
10,000 (3)
0 (4)
1,477,340
29.96 %
* %
* %
* %
* %
30.80 %
1,800,000
389,100 (7)
38.27 %
8.27 %
(1)
(2)
(3)
(4)
The individual’s address is c/o Sino-Global Shipping America, Ltd., 136-56 39th Avenue, Room #305, Flushing, NY 11354.
Mr. Cao and Mr. Zhang each has received options to purchase 36,000 shares of the Company’s common stock, all of which underlying
shares are reflected in this table because they have vested.
Mr. Wang and Mr. Laing each has received options to purchase 10,000 shares of the Company’s common stock, all of which
underlying shares are reflected in this table because they have vested.
Mr. Liu has received options to purchase 10,000 shares of the Company’s common stock, all of which will vest more than 60 days
after the date hereof.
25
(5)
(6)
(7)
Mr. Zhang Zhong’s address is care of Tianjin Zhiyuan Investment Group Co., Ltd, 10th Floor, Tianwu Huaqing Building, No.22,
Jinrong Road, Dasi Industrial Park, Xiqing District Economic Development Zone, Tianjin City, P.R. China, 300385.
Mr. Kern’s address is 1027 Goldenrod Ave., Corona Del Mar, CA 92625.
Mr. Kern owns 176,200 shares in his individual name, 187,900 shares in the Daniel E. Kern ROTH IRA, and 25,000 shares through
Kern Asset Management. Mr. Kern maintains sole voting and dispositive power as to these shares.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The Board of Directors maintains a majority of independent directors who are deemed to be independent under the definition of
independence provided by NASDAQ Stock Market Rule 4200(a)(15). Other than as described herein, no transactions required to be disclosed
under Item 404 of Regulation S-K have occurred since the beginning of the Company’s last fiscal year.
On June 27, 2013, we signed a 5-year global logistic service agreement with TEWOO Chemical & Light Industry Zhiyuan Trade Co., Ltd
and TianJin Zhi Yuan Investment Group Co., Ltd (together “Zhiyuan”). TianJin Zhi Yuan Investment Group Co., Ltd is owned by Mr. Zhang
Zhong, the largest shareholder of the Company. For the year ended June 30, 2013, we have had no business transaction with Zhiyuan. Before
Mr. Zhang Zhong was a shareholder of the Company, he agreed with the Company to cause Zhiyuan to procure certain services from the
Company. The 5-year global logistic service agreement details the nature of such cooperation between Zhiyuan and the Company. Thus, while
Mr. Zhang Zhong’s initial agreement to direct business to the company was made when he was not a related party, the subsequent agreement
was entered after he was a related party.
As of June 30, 2013, we reported a due from related party of approximately $541,400 from Sino-G Trading Inc., an entity that is owned by
the brother-in-law of our CEO. Sino-G Trading Inc. performed as a fund transfer agent for our services in Tianjin, PRC, and the amount due
represents the balance that had not been paid to the local port.
Item 14. Principal Accountant Fees and Services.
Friedman LLP was appointed by the Company to serve as its independent registered public accounting firm for fiscal 2013. Audit services
provided by Friedman LLP for fiscal 2013 included the examination of the consolidated financial statements of the Company; and services
related to periodic filings made with the SEC. In addition, Friedman LLP provided review services relating to the Company’s quarterly reports.
Audit Fees
During fiscal 2013 and 2012, Friedman LLP’s fees for the annual audit of our financial statements and the quarterly reviews of the
financial statements included in Forms 10-Q were $ 150,000 and $ 225,000 , respectively.
Audit-Related Fees
None.
Tax Fees
None.
All Other Fee s
None.
Audit Committee Pre-Approval Policies
Before Friedman LLP was engaged by the Company to render audit or non-audit services, the engagement was approved by the
Company’s audit committee. All services rendered by Friedman LLP have been so approved.
26
Item 15. Exhibits, Financial Statement Schedules.
Number
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
14.1
21.1
31.1
31.2
32.1
32.2
99.1
Exhibit
Articles of Incorporation of Sino-Global Shipping America, Ltd.(1)
Bylaws of Sino-Global Shipping America, Ltd. (1)
Specimen Certificate for Common Stock (1)
Exclusive Management Consulting and Technical Services Agreement by and between Trans Pacific and Sino-China. (1)
Exclusive Marketing Agreement by and between Trans Pacific and Sino-China. (1)
Proxy Agreement by and among Cao Lei, Zhang Mingwei, the Company and Sino-China. (1)
Equity Interest Pledge Agreement by and among Trans Pacific, Cao Lei and Zhang Mingwei. (1)
Exclusive Equity Interest Purchase Agreement by and among the Company, Cao Lei, Zhang Mingwei and Sino-China. (1)
First Amended and Restated Exclusive Management Consulting and Technical Services Agreement by and between Trans
Pacific and Sino-China. (1)
First Amended and Restated Exclusive Marketing Agreement by and between Trans Pacific and Sino-China. (1)
Code of Ethics of the Company.(2)
List of subsidiaries of the Company.(3)
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(4)
Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(4)
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(4)
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(4)
Press release dated September 27, 2013 titled "Sino-Global Announces Fiscal 2013 Financial Results."(4)
(1) Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration Nos. 333-150858 and 333-148611.
(2) Incorporated by reference to the Company’s Form 10-KSB filed on September 29, 2008, File No. 001-34024.
(3) Incorporated by reference to the Company’s Form 10-K filed on September 22, 2009, File No. 001-34024.
(4) Filed herewith.
27
In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SINO-GLOBAL SHIPPING AMERICA, LTD.
SIGNATURES
September 27, 2013
September 27, 2013
September 27, 2013
September 27, 2013
September 27, 2013
By:
By:
By:
By:
By:
/s/ Zhang Mingwei
Zhang Mingwei
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Cao Lei
Cao Lei
Chief Executive Officer
(Principal Executive Officer)
/s/ Wang Jing
Wang Jing
Independent Director
/s/ Dennis Laing
Dennis Laing
Independent Director
/s/ Liu Tieliang
Liu Tieliang
Independent Director
28
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of June 30, 2013 and 2012
Consolidated Statements of Operations and Comprehensive loss for the years Ended June 30, 2013 and 2012
Consolidated Statements of Cash Flows for the years ended June 30, 2013 and 2012
Consolidated Statements of Changes in Equity for the years ended June 30, 2013 and 2012
Notes to the Consolidated Financial Statements
PAGE
F-1
F-2
F-3
F-4
F-5
F-6
REPORT OF INDEPENDENT PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders
Sino-Global Shipping America, Ltd.
We have audited the accompanying consolidated balance sheets of Sino-Global Shipping America, Ltd. and Affiliates (the “Company”) as of
June 30, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, cash flows and changes in equity for the
years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of June 30, 2013 and 2012, and the consolidated results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.
/s/ Friedman LLP
New York, New York
September 27, 2013
F-1
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
CONSOLIDATED BALANCE SHEETS
Assets
Current assets
Cash and cash equivalents
Advances to suppliers
Accounts receivable, less allowance for doubtful accounts of $690,065 and $357,042
Other receivables, less allowance for doubtful accounts of $233,950 and $80,000
Other current assets
Prepaid taxes
Deferred tax assets
Due from related party
Total current assets
Property and equipment, net
Other long-term assets
Deferred tax assets
Total Assets
Liabilities and Equity
Current liabilities
Advances from customers
Accounts payable
Accrued expenses
Other current liabilities
Total Current Liabilities
Total Liabilities
Commitments and Contingency
Equity
Preferred stock, 1,000,000 shares authorized, no par value
Common stock, 10,000,000 shares authorized, no par value; 4,829,032 and 3,029,032 shares issued as
of June 30, 2013 and 2012; 4,703,841 and 2,903,841 outstanding as of June 30, 2013 and 2012
Additional paid-in capital
Treasury stock, at cost - 125,191 shares
Accumulated deficit
Accumulated other comprehensive income
Unearned Stock-based Compensation
Total Sino-Global Shipping America Ltd. Stockholders' equity
Non-Controlling interest
Total equity
Total Liabilities and Equity
The accompanying notes are an integral part of these consolidated financial statements.
F-2
$
June 30,
2013
2012
3,048,831 $
231,772
3,142,203
142,206
12,488
26,288
-
541,377
4,433,333
360,277
3,788,966
377,835
82,257
27,356
175,000
541,377
7,145,165
9,786,401
267,662
18,278
105,100
415,672
30,457
344,000
$
7,536,205 $
10,576,530
$
710,172 $
3,219,240
51,352
424,141
303,437
7,467,145
92,217
169,628
4,404,905
8,032,427
4,404,905
8,032,427
-
-
10,750,157
1,144,842
(372,527)
(4,856,613)
54,791
(15,520)
7,709,745
1,191,796
(372,527)
(3,056,858)
16,709
(202,089)
6,705,130
5,286,776
(3,573,830)
(2,742,673)
3,131,300
2,544,103
$
7,536,205 $
10,576,530
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Net Revenues
Cost of revenues
Gross profit
General and administrative expenses
Selling expenses
Operating Loss
Financial (expense) income, net
Other income, net
Loss from equity investment
Net loss before provision for income taxes
Income tax (expense) benefit
Net loss
Net loss attributed to non-controlling interest
Net loss attributable to Sino-Global Shipping America, Ltd
Net loss
Other comprehensive income:
Foreign currency translation adjustments
Comprehensive loss
Less: Comprehensive loss attributable to non-controlling interest
For the years ended June 30,
2013
2012
$
17,331,759 $
33,881,248
(15,402,743)
1,929,016
(31,184,331)
2,696,917
(3,878,569)
(253,987)
(4,132,556)
(5,236,167)
(385,064)
(5,621,231)
(2,203,540)
(2,924,314)
(15,520)
52,253
-
36,733
46,169
134,970
(190,026)
(8,887)
(2,166,807)
(2,933,201)
(410,089)
120,232
(2,576,896)
(2,812,969)
(777,141)
(1,044,894)
(1,799,755)
(1,768,075)
$
(2,576,896) $
(2,812,969)
38,082
(2,538,814)
25,732
(2,787,237)
(831,157)
(1,084,114)
Comprehensive loss attributable to Sino-Global Shipping America Ltd.
$
(1,707,657) $
(1,703,123)
Loss per share
-Basic and diluted
Weighted average number of common shares used in computation
-Basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
$
(0.38) $
(0.61)
4,703,841
2,903,841
F-3
SINO-GLOBAL SHIPPING AMERICA LTD. AND AFFILIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30,
2012
2013
Operating Activities
Net loss
Adjustment to reconcile net loss to net cash used in operating activities
$
(2,576,896) $
(2,812,969)
Amortization of stock option expense
Depreciation and amortization
Provision for doubtful accounts
Deferred tax expense (benefit)
Loss from equity investment
Gain on disposition of property and equipment
Changes in assets and liabilities
Decrease (Increase) in advances to suppliers
Decrease (Increase) in accounts receivable
Decrease in other receivables
Decrease in other current assets
Decrease in prepaid taxes
Decrease in other long-term assets
Increase (Decrease) in advances from customers
(Decrease) Increase in accounts payable
(Decrease) Increase in accrued expenses
Increase (Decrease) in other current liabilities
139,615
198,825
518,835
413,900
-
(3,448)
128,505
127,928
235,629
74,984
1,068
6,964
406,735
(4,247,905)
(40,865)
254,513
195,469
244,180
162,087
(150,000)
190,026
-
(21,970)
(2,103,063)
40,018
23,424
259,136
5,784
(407,454)
4,553,592
11,071
(3,621)
Net cash (used in) provided by operating activities
(4,361,613)
185,710
Investing Activities
Acquisitions of property and equipment
Proceeds from sale of fixed assets
Net cash used in investing activities
Financing Activities
Proceeds from Issuance of common stock
Increase in due from related party
Decrease in noncontrolling interest in majority-owned subsidiary
Net cash provided by (used in) financing activities
Effect of exchange rate fluctuations on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental information
Income taxes paid
The accompanying notes are an integral part of these consolidated financial statements.
F-4
(67,116)
16,185
(42,680)
-
(50,931)
(42,680)
3,040,412
-
(13,876)
-
(541,377)
(28,097)
3,026,536
(569,474)
1,506
(19,051)
(1,384,502)
(445,495)
4,433,333
4,878,828
3,048,831 $
4,433,333
26,400 $
26,400
$
$
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Additional
paid-in
capital
Treasury
stock
Accumulated
Accumulated
other
comprehensive
deficit
loss
Unearned
stock-based
compensation
Total
stockholders'
Equity
Non-
controlling
interest
Total Equity
Common stock
Shares
Amount
3,029,032 $ 7,709,745 1,191,796 $
(372,527) $ (1,288,783) $
(9,023) $
(397,558) $ 6,833,650 $ (1,658,559) $ 5,175,091
3,029,032 7,709,745 1,191,796
1,800,000 3,040,412
19,400
(66,354)
(1,768,075)
(372,527) (3,056,858)
25,732
16,709
4,829,032 $ 10,750,157 1,144,842 $
(1,799,755)
(372,527) $ (4,856,613) $
38,082
54,791 $
195,469
195,469
25,732
195,469
(13,488)
(1,768,075) (1,044,894) (2,812,969)
(202,089) 5,286,776 (2,742,673) 2,544,103
(39,220)
(19,400)
66,354
139,615
3,040,412
-
-
139,615
38,082
(1,799,755)
3,040,412
-
-
139,615
(54,016)
(15,934)
(777,141) (2,576,896)
(15,520) $ 6,705,130 $ (3,573,830) $ 3,131,300
Balance as of June 30, 2011
Amortization of stock options
Foreign currency translation
Net loss
Balance as of June 30, 2012
Issuance of common stock
Issuance of stock options
Stock options forfeited
Amortization of stock options
Foreign currency translation
Net loss
Balance as of June 30, 2013
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SINO-GLOBAL SHIPPING AMERICA, LTD. AND AFFILIATES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
Sino-Global Shipping America, Ltd. (the “Company”) was incorporated on February 2, 2001 in New York . On September 18, 2007, the
Company amended the Articles of Incorporation and Bylaws to merge into a new Corporation, Sino-Global Shipping America, Ltd. in Virginia.
The Company’s principal geographic market is in the People’s Republic of China (“PRC”). As PRC laws and regulations restrict foreign
ownership of shipping agency service businesses, the Company provides its services in the PRC through Sino-Global Shipping Agency Ltd.
(“Sino-China”), a Chinese legal entity, which holds the licenses and permits necessary to operate shipping services in the PRC. Sino-China is
located in Beijing with branches in Qingdao, Qinhuangdao and Fangchenggang and provides general shipping agency services in all commercial
ports in the PRC.
On November 13, 2007, the Company formed a wholly owned foreign-owned enterprise, Trans Pacific Shipping Limited (“Trans Pacific
Beijing”), which invested in a 90%-owned subsidiary, Trans Pacific Logistics Shanghai Limited (“Trans Pacific Shanghai”; Trans Pacific
Beijing and Trans Pacific Shanghai are referred to collectively as “Trans Pacific”) on May 31, 2009.
Trans Pacific Beijing and Sino-China do not have a parent-subsidiary relationship. Trans Pacific Beijing has contractual arrangements with
Sino-China and its shareholders that enable the Company to substantially control Sino-China.
To build an international shipping agency service network, the Company formed a wholly-owned subsidiary, Sino-Global Shipping
Australia Pty Ltd. (“Sino-Global AUS”) in Perth, Australia on July 3, 2008, which serves the needs of customers shipping into and out of
Western Australia. The Company also signed an agreement with Monson Agencies Australia (“Monson”), one of the largest shipping agency
service providers in Australia. Through the Company’s relationship with Monson, the Company is able to provide general shipping agency
services to all ports in Australia.
The Company established another wholly-owned subsidiary on September 22, 2008, Sino-Global Shipping (HK) Limited ("Sino-Global
HK") to perform as a control and management center for southern Chinese ports and enables the Company to extend its offering of
comprehensive shipping agency services to vessels going to and from one of the world's busiest ports. On July 27, 2009, Sino-Global HK signed
an exclusive partnership agreement with Forbes & Company Limited (“Forbes”), which is a listed company on the Bombay Stock Exchange
(BOM: 502865) and one of the largest shipping and logistic service providers in India. Through the Company’s relationship with Forbes, it is
able to provide general shipping agency services to all ports in India.
The Company established a new wholly-owned subsidiary, Sino-Global Shipping Canada Inc.(“Sino-Global Canada”) in 2012, to provide
services for ships loading commodities at Canadian ports and delivering them to China.
F-6
The Company established a new wholly-owned subsidiary, Sino-Global Shipping New York Inc. in May 2013, to facilitate the
development of an integrated overseas and local shipping agency network to help generate new business referral activities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“US GAAP”).
(b) Basis of consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries, and its affiliates. All significant inter-company
transactions and balances are eliminated in consolidation. Sino-China is considered a variable interest entity (“VIE”), and the Company is the
primary beneficiary. The Company through Trans Pacific Beijing entered into agreements with Sino-China, pursuant to which the Company
receives 90 % of Sino-China’s net income. The Company does not receive any payment from Sino-China unless Sino-China recognizes net
income during its fiscal year. These agreements do not entitle the Company to any consideration if Sino-China incurs a net loss during its fiscal
year. In accordance with these agreements, Sino-China pays consulting and marketing fees equal to 85 % and 5 %, respectively, of its net income
to the Company’s wholly owned foreign subsidiary, Trans Pacific Beijing, and Trans Pacific Beijing supplies the technology and personnel
needed to service Sino-China. Sino-China was designed to operate in China for the benefit of the Company.
As a VIE, Sino-China’s sales are included in the Company’s total sales, and its income (loss) from operations is consolidated with the
Company’s. Because of the contractual arrangements, the Company had a pecuniary interest in Sino-China that requires consolidation of the
Company’s and Sino-China’s financial statements.
The Company has consolidated Sino-China’s income because the entities are under common control in accordance with ASC 805-10,
“Business Combinations”. The agency relationship between the Company and Sino-China and its branches is governed by a series of contractual
arrangements pursuant to which the Company has substantial control over Sino-China. For this reason, the Company has included 90% of Sino-
China’s net income in the Company’s net income, and only the 10 % of Sino-China’s net income not paid to the Company represents the non-
controlling interest in Sino-China’s income. Management makes ongoing reassessments of whether the Company is the primary beneficiary of
Sino-China.
The carrying amount and classification of Sino-China's assets and liabilities included in the Consolidated Balance Sheets are as follows:
Total current assets
Total assets
Total current liabilities
Total liabilities
F-7
June 30,
2013
2012
$
145,307 $
326,480
324,334
324,334
537,068
766,075
298,948
298,948
(c) Reclassification
Certain prior year amounts were reclassified to conform to the current year presentation. Advances to suppliers at the amount of $ 541,377
were reclassified to due from related party as of June 30, 2012. Certain line items on the Statements of Cash Flows for the year ended June 30,
2012 have been reclassified accordingly. These reclassifications have no material impact on the previously reported financial position, results of
operations or cash flows.
(d) Fair Value of Financial Instruments
We adopted the provisions of ASC 820, Fair Value Measurements and Disclosures, which clarifies the definition of fair value, prescribes
methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities available at the
measurement date.
Level 2 — Inputs other than quoted prices that are observable for the asset or liability in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated
by observable market data.
Level 3 — Unobservable inputs which reflect management’s assumptions based on the best available information.
The carrying value of accounts receivable, other receivables, other current assets, and current liabilities approximate their fair values because
of the short-term nature of these instruments.
(e) Use of Estimates and Assumptions
The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the reporting periods. Estimates are adjusted to reflect actual experience
when necessary. Significant accounting estimates reflected in the Company’s consolidated financial statements include revenue recognition, fair
value of stock options, cost of revenues, allowance for doubtful accounts, deferred income taxes, and the useful lives of property and equipment.
Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.
(f) Translation of Foreign Currency
The accounts of the Company and its subsidiaries, including Sino-China and each of its branches are measured using the currency of the
primary economic environment in which the entity operates (the “functional currency”). The Company’s functional currency is the US dollars
(“USD”) while Sino-China reports its financial position and results of operations in Renminbi (“RMB”). The accompanying consolidated
financial statements are presented in US dollars. Foreign currency transactions are translated into US dollars using the fixed exchange rates in
effect at the time of the transaction. Generally foreign exchange gains and losses resulting from the settlement of such transactions are
recognized in the consolidated statements of operations. The Company translates foreign currency financial statements of Sino-China, Sino-
Global AUS, Sino-Global HK, Sino-Global Canada and Trans Pacific in accordance with ASC 830-10, “Foreign Currency Matters”. Assets and
liabilities are translated at current exchange rates quoted by the People’s Bank of China at the balance sheet dates and revenues and expenses are
translated at average exchange rates in effect during the year. Resulting translation adjustments are recorded as other comprehensive income
(loss) and accumulated as a separate component of equity of the Company and also included in non-controlling interest.
F-8
The exchange rates for the years ended June 30, 2013 and June 30, 2012 are as follows:
Foreign currency
RMB:1USD
1AUD:USD
1HKD:USD
1CAD:USD
(g) Cash and Cash Equivalents
June 30,
2013
2012
BS
6.1787
0.9143
0.1289
0.9506
PL
6.2458
1.0266
0.1289
0.9956
BS
6.3249
1.0203
0.1289
0.9836
PL
6.3520
1.0323
0.1286
0.9967
Cash and cash equivalents consist of cash on hand, and other highly liquid investments which are unrestricted as to withdrawal or use, and
which have maturities of three months or less when purchased. The Company maintains cash and cash equivalents with various financial
institutions mainly in the PRC, Australia, Hong Kong and the United States. Cash balances of $ 2,604,933 are not insured by the Federal Deposit
Insurance Corporation or other programs.
(h) Accounts Receivable
Accounts receivable are presented at net realizable value. The Company maintains allowances for doubtful accounts for estimated losses.
The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the
collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors,
including the age of the balances, customers’ historical payment history, their current credit-worthiness and current economic trends.
Receivables are considered past due after 365 days. Accounts are written off after exhaustive efforts at collection. As of June 30, 2013 and 2012,
the allowance for doubtful accounts totaled $ 690,065 and $ 357,042 , respectively.
(i) Property and Equipment
Property and equipment are stated at historical cost less accumulated depreciation. Historical cost comprises its purchase price and any
directly attributable costs of bringing the assets to its working condition and location for its intended use. Depreciation is calculated on a straight-
line basis over the following estimated useful lives:
Buildings
Motor vehicles
Furniture and office equipment
20 years
5-10 years
3-5 years
The carrying value of a long-lived asset is considered impaired by the Company when the anticipated undiscounted cash flows from such
asset is less than its carrying value. If impairment is identified, a loss is recognized based on the amount by which the carrying value exceeds the
fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the
risk involved or based on independent appraisals. Management has determined that there were no impairments at the balance sheet dates.
F-9
(j) Revenue recognition
The Company charges shipping agency fees in two ways: (1) fixed fees that are predetermined with the customer, and (2) cost-plus fees that
are calculated based on the actual costs incurred plus a markup. The Company generally requires retainer payments in advance from customers
and bills them on the balance within 30 days after the transactions are completed.
Revenues are recognized from shipping agency services upon completion of services, which coincides with the date of departure of the
relevant vessel from port. Advance payments and deposits received from customers prior to the provision of services and recognition of the
related revenues are presented as advances from customers.
Some contracts provide that revenues are recognized as a mark up of actual costs incurred. In a situation where the services are completed
but the information on the actual expenses is not available at the end of the fiscal year, the Company estimates revenues and costs based on its
previous experience for the revenues of the same kind of vessels, port charges on the vessel’s particulars/movement and cost rate of the port. The
estimated revenues and costs also incorporate additional costs incurred, such as extra weight taxes because of extended parking time at a harbor,
additional tow boats used because of inclement weather, overtime during public holidays, etc. The estimated costs of revenue are based on the
cost information provided by the local port and /or the Company’s historical experience of similar transactions.
The Company reports its revenue on the amounts billed to customers based on several criteria: (1) the Company assumes all credit risk for
the amounts billed to customers, (2) the Company has multiple suppliers for services ordered by customers and discretion to select the supplier
that provides the services, and (3) the Company determines the nature, type or specifications of the services ordered by customers and the
Company is responsible for fulfilling these services.
(k) Taxation
Because the Company and its subsidiaries and Sino-China are incorporated in different jurisdictions, they file separate income tax returns.
The Company uses the liability method of accounting for income taxes in accordance with US GAAP. Deferred taxes, if any, are recognized for
the future tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated
financial statements. A valuation allowance is provided against deferred tax assets if it is more likely than not that the asset will not be utilized in
the future.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties,
if any, related to unrecognized tax benefits as income tax expense. The Company had no uncertain tax positions as of June 30, 2013 and 2012,
respectively.
F-10
Income tax returns for the years prior to 2011 are no longer subject to examination by US tax authorities.
PRC Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income determined under PRC GAAP at 25 %. Sino-China and Trans Pacific are
registered in PRC and governed by the Enterprise Income Tax Laws of the PRC.
PRC Business Tax and Surcharges
Revenues from services provided by Sino-China and Trans Pacific are subject to the PRC business tax of 5 %. Business tax and surcharges
are paid on gross revenues generated from shipping agency services minus the costs of services which are paid on behalf of the customers.
In addition, under the PRC regulations, Sino-China is required to pay the city construction tax ( 7 %) and education surcharges ( 3 %)
based on the calculated business tax payments.
Sino-China reports its revenues net of PRC’s business tax and surcharges for all the periods presented in the consolidated statements of
operations.
(l) Loss per share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to holders of common shares by the weighted
average number of common shares outstanding during the years. Diluted earnings (loss) per share reflects the potential dilution that could occur
if securities or other contracts to issue common shares were exercised or converted into common shares. Common share equivalents are excluded
from the computation of diluted earnings (loss) per share if their effects would be anti-dilutive.
The effect of 102,000 stock options and 139,032 warrants for all periods presented were not included in the calculation of diluted EPS
because they would be anti-dilutive.
(m) Stock-based compensation
Valuations are based upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair
value of share-based payment awards was measured in the Black-Scholes option pricing model, using the level 2 inputs. Expected volatilities are
based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee
terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-
free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.
F-11
(n) Risks and Uncertainties
The operations of the Company are primarily located in the PRC. Accordingly, the Company’s business, financial condition, and results of
operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy.
The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in
North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and
foreign currency exchange. The Company’s results may be adversely affected by exchanges in the political, regulatory and social conditions in
the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation, among other things. In addition, the Company only controls Sino-China
through a series of agreements. If such agreements were cancelled, modified or otherwise not complied with, the Company may not be able to
retain control of this consolidated entity and the impact could be material to the Company’s operations.
(o) Recent Accounting Pronouncements
There have been no new accounting pronouncements that would have a material impact on the financial position of the Company.
3. OTHER RECEIVABLES / OTHER CURRENT LIABILITIES
(a) Other Receivables
Other receivables represent mainly amounts to be received from customers for advance payments made to the port agent for reimbursable
charges to be incurred in connection with the costs of services as well as loans to employees.
(b) Other Current Liabilities
Other current liabilities represent mainly advance payments received from customers for reimbursable port agent charges to be incurred and
miscellaneous accrued liabilities.
4. PROPERTY AND EQUIPMENT, AT COST.
Property and equipment are as follows:
Land and building
Motor vehicles
Computer equipment
Office equipment
Furniture and Fixtures
System software
Leasehold improvement
Total
Less : Accumulated depreciation and amortization
Property and equipment, net
$
June 30,
2013
2012
80,461 $
731,372
122,002
46,319
52,687
123,391
68,981
78,601
918,451
126,729
46,359
53,440
120,539
67,387
1,225,213
1,411,506
957,551
995,834
$
267,662 $
415,672
F-12
5. STOCK-BASED COMPENSATION
On January 31, 2013, the Company issued 10,000 stock options to a member of the audit committee, to purchase the Company’s common
stock. On January 1, 2013, 46,000 options were cancelled due to resignation of one employee and one member of the audit committee from the
Company. Accordingly, the Company reversed the unvested amount of $ 66,354 from unearned stock-based compensation.
A summary of the options is presented in the table below:
Options outstanding, beginning of year
Granted
Canceled, forfeited or expired
Options outstanding, end of year
Options exercisable, end of year
June 30, 2013
June 30, 2012
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Shares
Shares
138,000 $
10,000
(46,000)
7.43
2.01
7.43
138,000 $
-
-
7.43
-
-
102,000 $
6.90
138,000 $
7.43
92,000 $
7.43
100,400 $
7.49
Following is a summary of the status of options outstanding and exercisable at June 30, 2013:
Outstanding Options
Exercisable Options
Exercise Price
$
$
7.75
2.01
Number
Average
Remaining
Contractual Life
92,000
-
10,000 4.6 year
102,000
Average Exercise
Price
Number
$
$
7.75
2.01
Average
Remaining
Contractual Life
-
- 4.6 year
92,000
92,000
The issuance of the Options is exempted from registration under the Securities Act of 1933, as amended (the “Act”). The Options will vest
at a rate of 20% per year, with 20% vesting initially when granted. The Common Stock underlying the Options granted may be sold in
compliance with Rule 144 under the Act. The term of the Options is 10 years and the exercise price of the 2013 options is $ 2.01 (10,000
options). Each Option may be exercised to purchase one share of Common Stock. Payment for the Options may be made in cash or by
exchanging shares of Common Stock at their Fair Market Value. The Fair Market Value will be equal to the average of the highest and lowest
registered sales prices of Company Stock on the date of exercise.
The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. The aggregate fair value of $
15,520 and $ 202,089 at June 30, 2013 and 2012, respectively, is presented as “Unearned Stock-based Compensation”. The Company amortized
stock option expenses of $ 139,615 and $ 195,469 for the years ended June 30, 2013 and 2012 respectively.
The fair value of 10,000 stock options granted in 2013 was calculated at the grant date using the Black-Scholes option-pricing model with
the following assumptions:
F-13
Black-Scholes Option Pricing Model for 2013 options
Assumptions:
Stock Price
Strike Price
Volatility
Risk-free Rate
Expected life
Dividend Yield
Number of Options
$
$
1.94
2.01
452.04 %
0.88 %
5 yrs
0.00 %
10,000
Following is a summary of the status of warrants outstanding and exercisable at June 30, 2013:
Warrants Outstanding
Warrants Exercisable
Weighted
Aaverage
Exercise Price
Average
Remaining
Contractual Life
139,032
139,032 $
9.30 5.0 years
6. COMMON STOCK TRANSACTION
On April 19, 2013, the Company’s shareholders at the 2013 Annual Meeting of Shareholders voted and approved the issuance of 1,800,000
shares at the market trading price to an unrelated individual who, after the transaction will own a substantial amount of the common stock in
the Company. This individual also owns 90 % shareholder in Tianjin Zhiyuan Investment Group Ltd.(Tianjin). Tianjin and TEWOO Chemical
& Light Industry Zhiyuan Trade Co., Ltd signed a 5-year global logistic service agreement with the Company On June 27, 2013. See note 11.
7. NON-CONTROLLING INTEREST
Non-controlling interest in Sino-China consists of the following:
Sino-China:
Original paid-in capital
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Other adjustments
Trans Pacific Logistics Shanghai Ltd.
Total
8. CO MMITMENTS AND CONTINGENCY
(a) Office leases
June 30,
2013
2012
$
$
356,400 $
1,044
(85,653)
(3,818,847)
(30,793)
(3,577,849)
4,019
(3,573,830) $
356,400
1,044
(45,514)
(3,050,234)
(22,265)
(2,760,569)
17,896
(2,742,673)
The Company leases certain office premises and apartments for employees under operating leases through May 17, 2015. Future minimum
lease payments under operating leases agreements are as follows:
Twevle months ending June 30,
2014
2015
Rent expense for the years ended June 30, 2013 and 2012 was $ 214,066 and $ 354,264 , respectively.
F-14
Amount
$
$
146,114
41,227
187,341
(b) Contingency
The Labor Contract Law of the People’s Republic of China requires employers to insure the liability of the severance payments if
employees are terminated and have been working for the employers for at least two years prior to January 1, 2008. The employers will be liable
for one month for severance pay for each year of the service provided by the employees. As of June 30, 2013, the Company has estimated its
severance payments of approximately $ 127,200 , which has not been reflected in its consolidated financial statements, because management
cannot predict what the actual payment, if any, will be in the future.
9 . INCOME TAXES
The income tax (provision) benefit for the years ended June 30, 2013 and 2012 are as follows:
Current
USA
China
Deferred
USA
China
Total
For the years ended June 30,
2013
2012
$
$
3,811 $
-
3,811
(413,900)
-
(413,900)
(410,089) $
(29,768)
-
(29,768)
150,000
-
150,000
120,232
Operations in the USA have incurred a cumulative net operating loss of approximately $ 1,031,500 as of June 30, 2013, which may be
available to reduce future taxable income. This carry-forward will expire if not utilized by 2033 . Other deferred tax assets relating to the
allowance for doubtful accounts and stock compensation expenses amounting to $ 301,000 and $304,000 have been recorded respectively. 90 %
of the deferred tax assets balance has been provided as valuation allowance as of June 30, 2013 based on management’s estimate.
Income tax benefit for the years ended June 30, 2013 and 2012 varied from the amount computed by applying the statutory income tax rate
to loss before taxes. A reconciliation between the expected federal income tax rate using the federal statutory tax rate of 35 percent to the
Company’s effective income tax rate is as follows:
F-15
U.S. expected federal income tax benefit
U.S. state, local tax net of federal benefit
U.S. permanent difference
U.S. temporary difference
Permanent differences related to other countries
Other
Total tax expense (benefit)
For the years ended June 30,
2013
%
2012
%
(35.00)
(35.00)
(10.86)
(10.87)
1.20
44.66
19.30
(0.37)
18.93
0.78
28.89
9.50
2.60
(4.10)
The U.S. temporary difference was mainly comprised of unearned compensation amortization and provision for allowance for doubtful
accounts.
10. CONCENTRATIONS
Major Customer
For the years ended June 30, 2013 and 2012, approximately 63 % and 54 %, respectively, of the Company’s revenues were from one
customer. At June 30, 2013 and 2012 respectively, the same customer accounted for approximately 82 % and 62 % of the total accounts
receivable balance.
Major Suppliers
For the year ended June 30, 2013, two suppliers accounted for 22 % and 10 % of the total cost of revenues, respectively. For the year ended
June 30, 2012, two suppliers accounted for 13 % and 10 % of the cost of revenues, respectively.
11. Related Party Transactions
On June 27, 2013, the Company signed a 5-year global logistic service agreement with TEWOO Chemical & Light Industry Zhiyuan Trade
Co., Ltd and TianJin Zhi Yuan Investment Group Co., Ltd (together “Zhiyuan”). TianJin Zhi Yuan Investment Group Co., Ltd is owned by Mr.
Zhang Zhong, the largest shareholder of the Company. For the year ended June 30, 2013, the Company has had no business transaction with
Zhiyuan.
As of June 30, 2013 and 2012, the Company reported an amount due from related party of approximately $ 541,400 from Sino-G Trading
Inc.(“Sino-G”) , an entity that is owned by the brother-in-law of the Company’s CEO. Sino-G acted as a funds transfer agent for the Company’s
services in Tianjin, PRC.
-------------------------------------------------------------------------
F-16
Exhibit 31.1
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Securities and Exchange Commission Release 34-46427
I, Cao Lei, certify that:
(1) I have reviewed this Form 10-K of Sino-Global Shipping America, Ltd.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
(4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: September 27, 2013
/s/ Cao Lei
Cao Lei
Chief Executive Officer (Principal Executive Officer)
Exhibit 31.2
Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Securities and Exchange Commission Release 34-46427
I, Zhang Mingwei, certify that:
(1) I have reviewed this Form 10-K of Sino-Global Shipping America, Ltd.;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
(4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: September 27, 2013
/s/ Zhang Mingwei
Zhang Mingwei
Chief Financial Officer (Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with this Form 10-K report of Sino-Global Shipping America, Ltd. for the period ended June 30, 2013 as filed with the Securities
and Exchange Commission on the date hereof and pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, I, Cao Lei, certify that:
(1) This report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the this period report fairly presents, in all material respects, the financial condition and results
of operations of Sino-Global Shipping America, Ltd..
Date: September 27, 2013
/s/ Cao Lei
Cao Lei
Chief Executive Officer (Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with this Form 10-K report of Sino-Global Shipping America, Ltd. for the period ended June 30, 2013 as filed with the Securities
and Exchange Commission on the date hereof and pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, I, Zhang Mingwei, certify that:
(1) This report containing the financial statements fully complies with the requirements of section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the this period report fairly presents, in all material respects, the financial condition and results
of operations of Sino-Global Shipping America, Ltd..
Date: September 27, 2013
/s/ Zhang Mingwei
Zhang Mingwei
Chief Financial Officer (Principal Financial Officer)
Exhibit 99.1
CONTACTS:
Michael Huang, Chief Operating Officer
Sino-Global, Beijing
+86-10-6439-1888
FOR IMMEDIATE RELEASE
Stephen D. Axelrod, CFA
Wolfe Axelrod Weinberger Assoc. LLC
Tel. (212) 370-4500 Fax (212) 370-4505
SINO-GLOBAL ANNOUNCES FISCAL 2013 FINANCIAL RESULTS
- Shift in business to more protective services, creates improvement in gross margin levels -
- Turnaround in business well underway as company diversifying its customer base -
- Strong balance sheet with $3.0 million in cash and working capital of $2.7 million –
Beijing, September 27, 2013 – Sino-Global Shipping America, Ltd. (Nasdaq: SINO), an international provider of shipping agency services ,
today announced its selected financial results for fiscal year ended June 30, 2013 .
Highlights for the Fiscal Year Ended June 30, 2013
• Revenues decreased by 48.85% to US$17.3 million, from US$33.9 million in the fiscal year ended June 30, 2012.
• Gross margin increased to 11.13% in the current fiscal year compared to 7.96% in the prior fiscal year.
• Total general and administrative expenses were reduced by $1.36 million during the year, representing a decrease of 25.93% compared
to the last fiscal year.
• Net loss was US$2.58 million compared to net loss of US$2.81 million in fiscal 2012.
• Basic and diluted losses per share were US$0.38 and US$0.61 for fiscal 2013 and fiscal 2012, respectively. Earnings and losses per
share are adjusted for the non-controlling interest.
While China’s economic slowdown reduced the volume of iron ore imported into China and, consequently, hurt the company’s results in fiscal
2013, the company was able to streamline operations to improve gross margin, reduce overhead and reduce net operating losses. Mr. Michael
Huang, Chief Operating Officer, noted, “As a result of the challenges we faced in 2013, we devoted significant efforts to controlling our costs. If
we can grow our revenues with comparatively lower overhead and better gross margins, we expect favorable results in 2014 and beyond.”
The number of ships served decreased to 438 in fiscal 2013 from 477 in fiscal 2012, and the number of ships for which we provide higher per-
ship revenue loading and discharging services decreased by 55.65%. As a result, revenues decreased significantly; however, the number of ships
for which we provided protective services increased by 142.98%. These protective services, while lower revenue per ship, feature a higher gross
profit margin for our company.
In connection with the shift of revenue mix, Sino-Global undertook an intensive cost cutting program, which decreased expenses by $1.4 million
during fiscal 2013. Mr. Cao Lei, Sino-Global’s Chief Executive Officer, stated, “As challenging as 2013 was for our company, we have made
significant changes towards the end of the year that are positive catalysts going into the new fiscal year. As a result of these efforts, we are a
leaner company than this time last year, and we are able to focus on higher margin services, such as our protective services and our efforts in the
chartering and logistics business. We believe that these efforts will pay off long term for investors, as we drive revenues with lower expenses.
Mr. Cao continued, “Looking forward, we want to increase our market share in the Chinese shipping agency market and to expand our business
to related service areas through diversification. We believe we can meet these goals by continuing to focus on the high quality of our personnel,
the positive relationships we enjoy with local ports, businesses and agencies and the breadth of services we offer to clients. In addition, we
expect further cost cutting to occur as we reduce overhead expenses and streamline operations. With this in hand, I am looking forward to
sharing improved economics within our business.”
Selected Financial Results for Fiscal 2013
Revenues
Total revenues decreased by 48.85% from $33,881,248 for the year ended June 30, 2012 to $17,331,759 in the comparable year in 2013. The
number of ships that generated revenues for the company decreased from 477 for the year of fiscal 2012 to 438 for the comparable period of
fiscal 2013. More importantly, th e company provided protective services for more ships, which generated significantly lower revenues per ship.
For the year ended June 30, 2013, the company provided protective services to 277 ships, compared to 114 ships for the year of fiscal 2012. In
contrast, the company provided loading/discharging service to 161 and 363 ships for the years ended June 30, 2013 and 2012, respectively.
Cost of Revenues
Costs of revenues as a percentage of the total revenues decreased from 92.04% for the year ended June 30, 2012 down to 88.87% for the year
ended June 30, 2013. Consequently, the company’s gross margin increased from 7.96% for the year ended June 30, 2012 up to 11.13% for the
year ended on June 30, 2013. The gross margin increased because the company provided protective services to more ships, which had generated
higher gross margin compared to loading/discharging services.
Operating Expenses
General and administrative expenses decreased by 25.93% from $5,236,167 for the year ended June 30, 2012 to $3,878,569 for the year ended
June 30, 2013. This mainly due to (1) decreased office rent of $140,198, (2) a decrease of $536,028 in business promotion, (3) decreased public
company listing expenses of $224,400, (4) decreased salaries and benefits for the company’s staff of $494,630, (5) decreased travelling expense
of $89,370. The decrease of general and administrative expenses was offset by an increase of $351,493 in the bad debts provision. T he company
will continue its budget control efforts to reduce the general and administrative expenses as a percentage of total revenues.
Selling expenses decreased by 34.04% from $385,064 for the year ended June 30, 2012 to $253,987 for the year ended June 30, 2013. Most
selling expenses are commissions paid to business partners who refer shipping agency business to the company .
Operating Loss
The company had an operating loss of $2,203,540 for the year ended June 30, 2013, compared to an operating loss of $2,924,314 for the
comparable year ended June 30, 2012. The operating loss for the year of fiscal 2013 was decreased primarily due to the reduced costs of
revenues and general and administrative expenses.
The company’s net financial expense was $15,520 for the year ended June 30, 2013, compared to our net financial income of $46,169 for the
year ended June 30, 2012. The net financial expense was derived largely from the foreign exchange income recognized in the financial statement
consolidation. Foreign exchange losses resulting from the settlement of foreign exchange transactions are recognized in the consolidated
statements of operations.
The company’s income tax expense was $410,089 for the year ended June 30, 2013, compared to income tax benefits of $120,232 for the year
ended June 30, 2012. The income tax expense of $413,900 was deferred tax expense resulted from an increase of the valuation allowance of
deferred tax assets.
Net Loss
The company reported a net loss of $2,576,896 for the year ended June 30, 2013, compared to net loss of $2,812,969 for the year ended June 30,
2012. After deduction of non-controlling interest in loss, net loss attributable to Sino-Global Shipping America, Ltd. was $1,799,755 for the year
ended June 30, 2013, compared to net loss of $1,768,075 for the year ended June 30, 2012. With other comprehensive loss foreign currency
translation, comprehensive loss was $1,707,657 for the year ended June 30, 2013 , compared to comprehensive loss of $1,703,123 for the year
ended June 30, 2012.
Other Selected Data
The company has financed its operations primarily through cash flows from operations. As of June 30, 2013, the company had $3,048,831 in
cash and cash equivalents. The company’s cash and cash equivalents primarily consist of cash on hand and cash in banks. The company
deposited approximately 94.65% of its cash in banks in the USA, Australia, Canada and Hong Kong.
About Sino-Global Shipping America, Ltd.
Registered in the United States in 2001, Sino-Global provides high-quality shipping agency services internationally, with a particular strength in
serving international shipments to and from Chinese ports. With local branches in most of China's main ports and contractual arrangements in all
those where it does not have branch offices, Sino-Global is able to offer efficient, high-quality shipping agency services to shipping companies
entering Chinese ports. With contractual relationships with local shipping agencies in Australia, India, Hong Kong and South Africa, Sino-
Global provides complete shipping agent services to companies involved in trades ports in the USA and these countries.
Sino-Global provides ship owners, operators and charters with comprehensive yet customized shipping agency services including intelligence,
planning, real-time analysis and on-the-ground implementation and logistics support. Sino-Global has achieved both ISO9001 and UKAS
certifications.
Forward Looking Statements
No statement made in this press release should be interpreted as an offer to purchase any security. Such an offer can only be made in
accordance with the Securities Act of 1933, as amended, and applicable state securities laws. Any statements contained in this release that relate
to future plans, events or performance are forward-looking statements that involve risks and uncertainties as identified in Sino-Global's filings
with the Securities and Exchange Commission. Actual results, events or performance may differ materially. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as the date hereof. Sino-Global undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements that may be made to reflect the events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
For More Information
For a more detailed review of Sino-Global’s financial results for fiscal year ended June 30, 2013, please refer to the company’s filing on Form
10-K filing or Sino-Global’s web site: www.sino-global.com .
- Tables to Follow -
SINO-GLOBAL SHIPPING AMERICA LTD. AND AFFILIATE
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Net Revenues
Cost of revenues
Gross profit
General and administrative expenses
Selling expenses
Operating Loss
Financial (expense) income, net
Other income, net
Loss from equity investment
Net loss before provision for income taxes
Income tax (expense) benefit
Net loss
Net loss attributed to non-controlling interest
Net loss attributable to Sino-Global Shipping America, Ltd.
Net loss
Other comprehensive income:
Foreign currency translation adjustments
Comprehensive loss
Less: Comprehensive loss attributable to non-controlling interest
Comprehensive loss attributable to Sino-Global Shipping America, Ltd.
Loss per share
-Basic and diluted
Weighted average number of common shares used in computation
-Basic and diluted
For the years ended June 30,
2013
US$
2012
US$
17,331,759
33,881,248
(15,402,743)
1,929,016
(31,184,331)
2,696,917
(3,878,569)
(253,987)
(4,132,556)
(5,236,167)
(385,064)
(5,621,231)
(2,203,540)
(2,924,314)
(15,520)
52,253
—
36,733
46,169
134,970
(190,026)
(8,887)
(2,166,807)
(2,933,201)
(410,089)
120,232
(2,576,896)
(2,812,969)
(777,141)
(1,044,894)
(1,799,755) $
(1,768,075)
(2,576,896) $
(2,812,969)
38,082
(2,538,814) $
25,732
(2,787,237)
(831,157)
(1,084,114)
(1,707,657)
(1,703,123)
(0.38)
(0.61)
4,703,841
2,903,841
- More -
$
$
$
SINO-GLOBAL SHIPPING AMERICA LTD. AND AFFILIATE
BALANCE SHEET
Assets
Current assets
Cash and cash equivalents
Advances to suppliers
Accounts receivable, less allowance for doubtful accounts of $690,065 and $357,042
Other receivables, less allowance for doubtful accounts of $233,950 and $80,000
Other current assets
Prepaid taxes
Deferred tax assets
Due from related party
Total current assets
Property and equipment, net
Other long-term assets
Deferred tax assets
Total Assets
Liabilities and Equity
Current liabilities
Advances from customers
Accounts payable
Accrued expenses
Other current liabilities
Total Current Liabilities
Total Liabilities
Commitments and Contingency
Equity
Preferred stock, 1,000,000 shares authorized, no par value;
Common stock, 10,000,000 shares authorized, no par value; 4,829,032 and 3,029,032 shares issued, as
of June 30, 2013 and 2012; 4,703,841 and 2,903,841 outstanding as of June 30, 2013 and 2012
Additional paid-in capital
Treasury stock, at cost – 125,191 shares
Accumulated deficit
Accumulated other comprehensive income
Unearned Stock-based Compensation
Total Sino-Global Shipping America Ltd. Stockholders’ equity
Non-Controlling interest
Total equity
Total Liabilities and Equity
###
$
For the years ended June 30,
2013
US$
2012
US$
3,048,831 $
231,772
3,142,203
142,206
12,488
26,288
—
541,377
4,433,333
360,277
3,788,966
377,835
82,257
27,356
175,000
541,377
7,145,165
9,786,401
267,662
18,278
105,100
415,672
30,457
344,000
7,536,205
10,576,530
710,172
3,219,240
51,352
424,141
303,437
7,467,145
92,217
169,628
4,404,905
8,032,427
4,404,905
8,032,427
-
-
10,750,157
1,144,842
(372,527)
(4,856,613)
54,791
(15,520)
7,709,745
1,191,796
(372,527)
(3,056,858)
16,709
(202,089)
6,705,130
5,286,776
(3,573,830)
(2,742,673)
3,131,300
2,544,103
$
7,536,205 $
10,576,530